Scottish & Newcastle toasts £309m Foster's deal

Click to follow

The brewer Scottish & Newcastle bought the Foster's brand in the UK, Europe and the former Soviet Union countries yesterday for £309m.

S&N, which brews Kronenbourg and Newcastle Brown Ale, has sold the brand in Britain, Europe, Russia, Ukraine and the Baltic states since 1995 under a licensing deal with Foster's, Australia's biggest brewer.

Tony Froggatt, S&N's chief executive, said the 1995 agreement had held S&N back from fully developing and marketing the lager brand. "We had to get Foster's approval on brand changes, even on advertising. All that has been swept away," he said. "It would be unfair to say we're only buying back the royalty. We are buying a trademark with strong growth potential."

Last year, S&N paid £15m in royalties to Foster's, a figure that has been increasing because of strong growth in the brand of about 10 per cent a year. The UK brewer has several Foster's products in the pipeline, one of which will be launched "relatively soon", Mr Froggatt said. "There are real opportunities. In 11 years, we've only really introduced one new [Foster's] brand."

The acquisition also opens up a raft of new countries in the former Soviet Union as well as Turkey, a fast-growing beer market. The territories S&N is buying represent 80 per cent of Foster's volumes worldwide. Foster's is the UK brewer's biggest beer brand and accounts for 14 per cent of its sales volumes.

S&N raised £210m through a placing of 42 million shares at 500p yesterday. The rest of the acquisition will be funded by borrowings. Its shares closed down 25p at 506.5p, valuing the company at £4.5bn. The deal is expected to boost earnings within the next two to three years.

Mr Froggatt said he would focus his efforts on big markets such as the UK, where Foster's is the third-best-selling beer brand, as well as Russia.

The chief executive of Foster's, Trevor O'Hoy, said: "Foster's retains the brand ownership in the world's fastest-growing beer markets. Outside of Europe, the market for beer is twice the size and is growing at two to three times the rate of within Europe."

There has also been speculation that Foster's would sell its breweries in Asia in its efforts to tackle its underperforming international business. Mr Froggatt said there could be further bolt-on acquisitions.

Comments