SAB Miller May Buy Fosters


The group that failed twice to take on the world and this year set itself up for a takeover by spinning off its wine business yesterday announced that one of the world's big brewers,
SABMiller's proposal that it take over Fosters for $4.90 a share, or $11.2 billion, was dismissed as too low by the Foster's board and sharemarket investors agreed, pushing Foster's shares more than 13 per cent higher to $5.15 on heavy turnover.

The London-listed SABMiller says it will continue to press its case for a friendly takeover, and in all likelihood will eventually increase its offer and add Foster's Lager, Victoria Bitter and other Foster's brands to a stable that includes Miller Draft, Urquell, Peroni and Grolsch.

A takeover will leave Australia's two big brewers in foreign hands after Kirin of Japan's move to full ownership of Lion Nathan in 2009. It is unlikely to be blocked by the Gillard government.

Foster's is an Australian icon, albeit an emotive one, and does not have the national strategic value that persuaded the government to prevent the Australian Securities Exchange from accepting a takeover bid from the Singapore Exchange in May.

The takeover proposal for the Melbourne-based brewer follows mergers that have created an elite group of international beer giants - SABMiller, the union of South African Breweries and Miller Brewing that is five times larger than Foster's; the even larger Anheuser-Busch InBev, a $US92 billion ($A87 billion) amalgam of America's Anheuser Busch (Budweiser) and Europe's InBev group (Stella Artois); and Heineken of the Netherlands.

For them and others with international ambition, including Japan's Asahi group, Foster's is a pawn in a larger global game, but things could have been different.

In the '80s John Elliott realised early that the brewing industry would go global, and put Foster's into the race with acquisitions in Britain and North America. But what was Elders IXL imploded under the weight of its debts in the early '90s, and the overseas brewing interests were sold off. Elliott got the trend right: it was his execution that was wrong.

From the mid-'90s, a rehabilitated Foster's expanded again, into wine. It was a refinement of Elliott's strategy, and a response to a steady decline in beer consumption and brand loyalty that has seen consumption per person here halve since the mid-'70s to levels last seen in the late 1940s.

But Foster's overpaid in its 2000 takeover of America's Beringer wine group and paid too much again in 2005 when it took over Southcorp, the Australian owner of Penfolds. It booked total losses of $2.4 billion on the misadventures, and in May last year signalled it would return to its brewing roots by hiving the wine business off.

A bid was being tacitly invited from that time, although SABMiller waited until the split happened last month, and it's now probably just a question of price.

More than 100 million Foster's shares changed hands yesterday, as traders who gamble on takeovers boarded. Their entry price suggests a 12 per cent increase in the bid to $5.50 a share gets SABMiller in the door.