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Foster's Could Be a Target in Global Beer Consolidation |
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Friday, 03 October 2008 |
Foster's Group, Australia's largest brewer, could become the next target in the global consolidation of the beer industry after the company appointed advisers to help with a takeover defense.
Foster's beer business, which has a 52 percent market share in a duopoly in Australia, has been valued at about $11 billion Australian dollars, or $8.7 billion, by UBS, while the underperforming wine business could be worth up to 4 billion Australian dollars.
"Obviously people are looking at it, but I think it becomes a harder deal to do" before a breakup of the wine and beer operations, said a banker who declined to be identified as he was not authorized to speak to media.
This is the case unless someone is speculating that Foster plans "to break it up themselves by potentially spinning off the wine business and offering it back to shareholders," he added.
Bankers said the appointment of Goldman Sachs as a defense adviser could also have been hastened by news last week that Deutsche Bank has accumulated a 5.26 percent stake in Foster's. Deutsche Bank did not reveal the identity of the shareholder in a filing to the stock exchange.
"I would be surprised" if the mandate to Goldman Sachs is independent of Deutsche Bank revealing the stake, the banker added.
Foster's shares have jumped 8.6 percent since news of the 5 percent shareholder, while the broader market has slipped 3 percent.
The beer industry has undergone much consolidation this year and although beer is generally seen as recession-proof, current financial conditions make the financing of any takeover bid a tricky proposition.
Analysts say Molson Coors Brewing may be interested in Foster's, either on its own or potentially together with SABMiller, with which it recently combined operations in the United States.
SABMiller, the world's largest brewer, already has a presence in Australia via a joint venture with Coca-Cola Amatil .
Another banker, requesting anonymity because the matter was confidential, told Reuters that Goldman Sachs JB Were has been appointed to help Foster's with a defense strategy.
A spokesman for Foster's would not confirm or deny whether the company had any defense plan, or whether it had appointed advisers.
However, spokesman Troy Hey said the brewer had a long-standing relationship with Goldman Sachs JB Were.
"Goldman is Foster's long-term preferred banker and helped out on the acquisition of Southcorp," he said, referring to Foster's 3.7 billion dollar acquisition of the wine producer Southcorp in 2005, with brands including Penfolds and Rosemount.
Foster's in July ousted its chief executive Trevor O'Hoy, who led the acquisition. It has acknowledged that it paid too much for the wine assets and that it may list the wine business separately or sell off some brands or vineyards.
Among potential buyers, SABMiller has the license to the Foster's brand in the United States and owns it in India.
Speculation has also mentioned Heineken of the Netherlands, the world's third-largest beermaker, which owns the Foster's brand in Europe. But Heinken has taken on a large debt to fund its purchase earlier this year of large parts of Scottish & Newcastle.
Fund managers wondered whether any deal was likely in the short term, given the turbulent state of financial markets and the difficulty of raising debt to fund a takeover.
"If anyone is thinking of a bid, it would be a day-to-day proposition depending on how the financing is going," said Craig Young, a fund manager at Tyndall Asset Management.
(C) 2008 International Herald Tribune. All Rights Reserved
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