It's (SAB) Miller time for Foster's

Foster's has finally accepted a bid from SABMiller, for 9.9bn Australian dollars. Clearly its defences have softened as the beers kick in...

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Last Updated: 15 Sep 2014
Fosters had rejected SAB's previous approach a couple of months back, a bid worth A$9.5bn, saying it undervalued the company. But SAB was undettered and has come back more aggressively, with a bid worth A$5.10 a share, equivalent to US$10.2bn in total. Its persistence has clearly paid off: the Foster's board said it would be recommending the latest offer to its shareholders, who will vote on whether to accept it.

They’d be stupid to say no: to use a nightclub metaphor, it’s approaching 2am kicking out time, and when the lights come on everyone will be able to see what state Foster’s is in. It may be one of Australia's most famous names, and the country's biggest brewer by sales – with a 50% domestic market share – but it’s been enduring sluggish sales and is now sagging under $1.7bn of debt (a weak and unsatisfying performance to match the nature of the beer). No wonder SAB has hardly had to fight off a rush of rival suitors.

In the UK the brand's image still suffers from associations with the old cork-hatted Paul Hogan ads from the 1980s, which haven't helped it against more 'sophisticated' campaigns pushing the likes of Stella Artois. Yet it certainly seems a good move for SAB, the London-based South African company behind Peroni, Grolsch and Coors. It may be the second biggest global brewer by volume (after Anheuser-Busch InBev NV), but 80% of its profits come from fast-growing emerging markets – that’s compared to a 50% average for its rivals. So the Foster’s represents its chance to bolster its presence in the world’s mature drinks markets too. And you don’t get any more established a beer-drinking race than the Aussies.

But it’s not just how keen the people are on sinking tinnies: Australia's economy is growing, and looks set to continue to benefit from booming growth in Asia, where rising incomes and thirsts for a Western lifestyle are fueling demand for consumer products. The plan is surely to bring in SAB’s global commercial nous, to administer a couple of Alka Seltzer and a whopping financial fry-up to help fix Foster’s’ current hangover. How long before the Chinese are having a g'day lapping up the Amber Nectar too?

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