Drawn-out affair expected for SABMiller-Foster deal

SABMiller’s bid for Foster’s Group is expected to take months to resolve, in the absence of any other bidders emerging, as Foster’s tries to get the world number two brewer to sweeten its $10-billion offer, investors and analysts said.

Foster’s shares have jumped to trade 6% above SABMiller’s offer, rejected on Tuesday, with investors betting that SABMiller may have to raise its original bid by at least 10% to seal the deal.

“SABMiller is the logical buyer,” said John Grace, portfolio manager at Ausbil Dexia, which owns a 0.5% stake in Foster’s, according to Thomson Reuters data.

“They’ve got intentions to grow their global market share and Foster’s presents an attractive opportunity. They’re trying to engage with the board to come to an agreement. So it’s early days,” he said.

Foster’s is alluring for its 50% market share in Australia, where its Victoria Bitter, Pure Blonde and Cascade beers help it earn some of the best margins in the developed world.

Others own the Foster’s brand offshore, including SABMiller, which owns the brand in India.

Brokers have speculated that SABMiller, which brews Peroni, Grolsch and Miller, would have to offer at least $5.25 (Australian dollars) to draw Foster’s into talk, and would have to pay at least $5.40 to clinch the deal. Foster’s shares last traded at $5.19.

“They’ll have to up the price a little bit,” said a portfolio manager at a Sydney-based fund that owns Foster’s shares, declining to speculate on what would be a fair price.

“The beer volume’s been down. They’re trying to turn it around. So you’re buying at the bottom of the cycle. Why would you give it away?”

Disciplined buyer
SABMiller is seen as the only likely bidder, with others seen as too laden with debt to get involved. Key potential suitors have signalled they were not interested, including world number three brewer Heineken, Japan’s Asahi Breweries and Denmark’s Carlsberg.

SABMiller has got to know the Australian market through its Pacific Beverages joint venture with Coca-Cola Amatil, so it has a good view on the turnaround potential in the business.

It is known for its discipline on acquisitions, having last year walked away from bidding for Mexico’s Femsa, bought by Heineken in an all-share deal worth US$7.6-billion, including net debt, which valued the maker of Dos Equis beer at 11.2 times trailing Ebitda.

At an enterprise value of $11.2-billion, SABMiller’s bid for Foster’s is already at 11.8 times trailing Ebitda.

It has agreed to pay C-C Amatil up to $380-million for its stake in the joint venture, if it is successful with its bid for Foster’s, which it needs to factor into how much it would be willing to pay for Foster’s. — Reuters

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Sonali Paul
Sonali Paul works from Hyderabad, Andhra Pradesh. Writer, Painter, Yoga Teacher and Pranic Healer

Related stories

Is Heineken brewing a better Africa?

Multinational corporations are considered motors for development in Africa and the Dutch beer giant Heineken is often cited as one of the best examples. The reality is different and distressing

Heneiken workers prepare to march against ‘sex for shifts’

Workers say the company is turning a blind eye to alleged abuses by managers at its Sedibeng brewery

Labour court judges block workers’ right to strike

In recent weeks, three cases have come to light that clearly show that labour court judges are issuing court orders forbidding strikes

Paradise for corporates and ultrarich

The Paradise Papers highlight the need for enforcing regulations to stem tax avoidance

Heineken issue ferments: Labour-broking shows few signs of disappearing

Workers want permanent jobs as the company allegedly tries to evade new labour-broker laws

Anglo finds SA hard to love or leave

After 100 years, the mining giant remains a big fish in our political and economic pond

Subscribers only

Toxic power struggle hits public works

With infighting and allegations of corruption and poor planning, the department’s top management looks like a scene from ‘Survivor’

Free State branches gun for Ace

Parts of the provincial ANC will target their former premier, Magashule, and the Free State PEC in a rolling mass action campaign

More top stories

Mboweni plans to freeze public sector wage increases for the...

The mid-term budget policy statement delivered by the finance minister proposes cutting all non-interest spending by R300-billion.

SAA to receive R10.5-billion government bailout after all

Several struggling state-owned entities received extra funds after the medium term budget policy speech

Malawi court judges win global prize

Members of the small African country’s judiciary took a stand for democracy to international approval

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday