Foster's shares get frothy on takeover talk

Foster's Group shares soared to a record yesterday as its chief executive, Trevor O'Hoy, stoked speculation that his A$12bn (£4.8bn) company could become a takeover target.

Shares in the Australian drinks group surged 12 per cent to an all-time high of A$6.12 before closing 50c higher at A$5.95 after an Australian newspaper reported that the world's two largest brewers, InBev and SABMiller, and a throng of private equity firms were sizing up Foster's.

Mr O'Hoy said he had not "heard any specifics" about a potential bid but made little attempt to quash the rumours. "We could not be in a better place as a company goes, so that does not surprise me, that sort of interest." He added that any bidder would have to pay a hefty premium for Foster's. "People are prepared to pay big money for companies that have strategic value... We are the No 1 premium wine company in the world today, we have an unassailable position in multi-beverage in Australia."

Foster's also announced it would buy back A$200m of its shares and unveiled a 27 per cent rise in annual profits to A$1.16bn, boosted by the sale of the international brewing assets for A$705m.

Insiders thought it unlikely that SABMiller would bid for the company and pointed to the UK group's recent deals such as a joint venture to promote its premium brands in Australia and the US$120m (£63m) acquisition of the Foster's brand in India. Foster's beer business is focused on the mature Australian market while SABMiller specialises in emerging markets. City analysts also questioned the logic of a bid by a brewing giant alone as roughly half the value of Foster's is in the wine business, which makes it an unlikely target for a brewer given the limited synergies between beer and wine.