SABMiller, the world’s second-largest brewer, has vowed it will continue to court Australian beer group Foster’s, despite a A$9.5-billion ($10.1-billion) takeover approach being spurned as “significantly undervaluing” the business.
Shares in the group behind Victoria Bitter and Carlton Draught jumped 14% to A$5.16 after the bid was confirmed — well above of SABMiller’s proposed price of A$4.90 a share. Investors appeared to be betting on the London-listed brewer returning with a sweetened offer or a counterbidder emerging from the wings.
“This is a proposal to the Foster’s board. We expect to engage,” said SABMiller chief executive Graham Mackay. “This is not a hostile offer and we have given no indication we would move that way.” A takeover of Foster’s, which generates close to 50% of Australian beer sales, would be the first major deal in a mature Western market since Belgian-based Inbev acquired the United States’ Anheuser-Busch three years ago.
The Anheuser deal was struck only after a political storm, which even prompted candidates to break from the presidential race to voice their disapproval. “I do think it would be a shame if Budweiser [Anheuser’s leading brand] is foreign-owned,” said Barack Obama, the Democratic presidential hopeful at the time.
Earlier this week Mackay was at pains to stress his sensitivity to the cultural importance of some of Australia’s best-loved beers. “We are keenly aware of Foster’s long-standing and proud heritage in Australia and understand that many stakeholders will be concerned about the future of the company,” he said.
Beer sales per head in Australia are gradually declining but the market remains highly profitable and dominated by the two largest players — Foster’s and Lion Nathan, which is owned by Japan’s Kirin — which together control more than 90% of sales. SABMiller has been competing in Australia for five years through a joint venture but has amassed a market share of just 1%.
The group, which makes Peroni, Grolsch and Miller Lite, is keen to secure a breakthrough deal with Foster’s as it sees Australian beer sales benefiting from strong immigration trends as well as a broader economy riding high on the back of the global commodities boom.
SABMiller’s spurned approach was at a price premium of just 8.2% to Foster’s share price on Monday night, but some analysts suggested takeover speculation had already been factored into the shares since the group announced plans three years ago — finally executed last month — to demerge its wine business.
Mark Kelly, an analyst at Olivetree Securities, suggested Foster’s shareholders, many of whom have been unhappy about how the business was run in the past, would probably put pressure on the board to talk to SABMiller.
Among the rival brewers known to be looking closely at Foster’s is Mexican firm Grupo Modelo, which is part-owned by Anheuser. It has cash on its balance sheet and could join forces with either Anheuser or fellow US brewer Molson Coors, also believed to be interested.
Heineken appeared to rule itself out of the running on Tuesday. “We see Europe as our home base. Europe is to a large extent profitable, but a very mature market, so the expansion we do outside Europe will be in emerging markets,” said finance director Rene Hooft Graafland. “To do a mature deal completely outside that base does not make sense. Better spend your money in Mexico, Brazil, Africa or Asian markets.”
Other possible suitors include Japan’s Asahi and Danish brewer Carlsberg, though both are thought likely to struggle to find the financing. Heineken owns the Foster’s lager brand in the United Kingdom. —