Strewth - SABMiller makes £7.2bn hostile bid for Foster's

Having been rebuffed by the Australian brewer's management two months ago, SAB has now taken a more aggressive stance. And Foster's shareholders seem enthusiastic.

by Emma Haslett
Last Updated: 06 Nov 2012
It’s going to take more than a tinny or two of the amber nectar to calm Foster’s management down this morning, after brewer SABMiller (the company behind Peroni, Grolsch and Coors, to name but a few) made a hostile A$11.2bn (£7.2bn) bid for the company. It’s only two months since SAB, the world’s second-largest brewer, was rebuffed by Foster’s management, which claimed it ‘significantly undervalued’ the company. But despite its 50% Aussie market share, Foster’s hasn’t exactly had a bonza year, and investors seem keen for an acquisition – and fast…

Now admittedly, that bid (A$4.90 a share) does include $1.7bn worth of debt, which any potential buyer would have to be willing to take on. Which might go some way to explaining why the bidding war the Foster’s contingent had, clearly, been anticipating (Mexican firm Modelo, Asahi in Japan and Anheuser-Busch inBev were all rumoured to be interested), has so far failed to materialise. SABMiller, the London-listed brewer with its roots in South Africa, is the only game in town so far.

It probably also doesn’t help that despite the fact things have started to look promising since Foster’s separated from Treasury Wine Estates, its unprofitable wine arm, it’s still expected to publish disappointing full-year results next week. (Although one optimistic analyst did point out that forecasts are ‘so low, there is plenty of scope to surprise on the upside’. Hmm). And while share prices did rally for a while, hitting A$5.22 just after SABMiller’s failed approach back in June, they’ve slipped back and have been hovering around A$4.90 for the past week or so. So any argument by management that SABMiller is under-valuing it is probably not going to hold much sway.

The other thing management will have to contend with is the enthusiasm from investors for something to happen, takeover-wise. The Times pointed out that at a shareholder meeting in Melbourne recently, one frustrated investor told CEO John Pollaers: ‘You’ve got an offer from SAB, they’re the second-biggest brewer in the world and you’ve said it’s not sufficient. I agree with that – but why wouldn’t you engage with them? Why not go to them and say, these are the reasons we feel it’s undervalued?’ With that sort of support from shareholders, we suspect it’s only a matter of time before Australia’s favourite beer joins the SABMiller ‘family’…

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