SAB turns hostile with A$9.5bn bid for Foster's investors

  • @kathymarksoz

When the British-based brewer SABMiller offered A$4.90 (£3.14) a share for the Australian beer giant Foster's in June, the latter's chief executive, John Pollaers, dismissed the approach as "so far away from reality it wasn't worth engaging".

Now SABMiller – which makes Grolsch, Miller Lite and Peroni – has gone directly to shareholders with the same offer, which values the group at A$9.5bn. It said it was making the move because of a lack of "willingness to engage" by the Foster's board.

The hostile bid comes less than a week before the Australian company's annual results, which surprised some analysts. They are expected to show a decline in beer profits for Foster's, which spun off its struggling wine operation in May to focus on the beer division.

Although Foster's is considered a quintessentially Australian brand, its lager is far more popular in Britain than in its country of origin. Australians, who have seen most of their favourite home-grown brands – including Vegemite spread and Arnott's Biscuits – taken over by foreign companies, seem resigned to the prospect of the nation's biggest brewer going the same way.

Foster's declined to comment yesterday on the latest move by SABMiller, the world's second largest brewer.

SABMiller said the offer would be reduced by any future dividend paid by Foster's. Some shareholders hailed the bid as a way of breaking the deadlock. "The move is welcome in that it'll get the parties engaged," Matthew Williams, Australian equities manager at Perpetual Investments – which has a 4.7 per cent stake in Foster's – said. "The ball is in play."

SABMiller, listed in London and Johannesburg, said it believed its offer was "attractive" and should be put to shareholders. "As there has been no willingness to engage in relation to SABMiller's proposal on the part of the Foster's board, SABMiller has decided to make an offer to Foster's shareholders directly," it said.

In June, analysts said the brewer might have to pay up to A$5.50 a share. Forecasts have now been revised downwards to A$5.10-$5.20.

If results next Tuesday are disappointing, it will add to the pressure on Foster's. Its shares closed up 0.6 per cent yesterday at A$4.96.

Foster's, whose flagship brands are VB, Crown and Carlton Draught, has been losing market share as a result of fierce competition and a shrinking domestic market as Australia has become a nation of wine drinkers.

Statistics published in June show beer consumption at a 62-year low.

Foster's lager was launched in the UK in the 1980s with the slogan "Foster's – Australian for lager", and a memorable TV advertising campaign fronted by the Crocodile Dundee star Paul Hogan, who waxed lyrical about the "amber nectar".

However, the lager brand in the UK is now owned by Heineken and most genuine Australian beer in the UK is brewed in Manchester.

Australia's second largest brewer, Lion Nathan, which makes Tooheys and XXXX, is already foreign-owned: it was taken over by Japan's Kirin in 2009. Few doubt that Foster's will go the same way. Only the timing and the price are in doubt.

Carlsberg hit by tax rises

Carlsberg posted a 22 per cent fall in quarterly profits yesterday, mainly due to an increase in taxes on beer in Russia.

Shares in the Danish brewer sank 17 per cent in Copenhagen after it more than halved its forecast for full-year earnings growth from 20 per cent to 5-10 per cent.

Its chief executive, Joergen Buhl Rasmussen, said that results in Russia had been "below expectations" and that a recovery would take longer than expected as Russian consumers adapt to a rise in the average price of beer of about 30 per cent.

The group's international beer brands include Carlsberg, Tuborg and Baltika, which is the leader on the Russian market. The company has a 38.4 per cent share of the Russian beer market.

Carlsberg's second-quarter net profits were 2.1bn kroner (£247m), down from Dkr2.6bn a year ago. Its sales rose 4 per cent to Dkr18.7bn over the quarter.

Jens Houe Thomsen, an analyst with Jyske Bank, said the brewer's results had been hit "primarily [by] the sharp price increases we have seen since last year's [Russian] tax increases", which had affected consumption.