Unfair dinkum: Foster's says no to SAB Miller's A$9.5bn bid

SAB Miller vowed yesterday to keep talking to the board of Foster's after Australia's biggest brewer rejected an all-cash A$9.5bn takeover bid by the world's second-largest brewing concern, saying that it significantly undervalued the company.

The announcement of the conditional proposal by SAB Miller – whose beer brands include Peroni, Grolsch and Miller Lite – to pay A$4.90 a share sent Foster's stock soaring to a nine-month high of A$5.14. This suggests that investors expect SAB Miller to improve its offer – or other rivals to enter the fray – but Graham Mackay, the SAB chief executive, remained tight-lipped on this subject last night. He said: "This is a proposal to Foster's board, weexpect to engage. This is not a hostile offer and we have given no indication we would move that way."

Foster's has 50 per cent of the Australian beer market, a national distribution network and seven of the top 10 brands in the country. Those that account for most of the company's $2.4bn annual revenues include Victoria Bitter, Cascade, Crown Lager, Pure Blonde and Carlton Draught. Foster's lager is almost non-existent as a brand in Australia, unlike in the UK, where it is licensed by Heineken.

SAB Miller, which is listed on the London and Johannesburg stock exchanges, sent its takeover proposal to the chairman of Foster's on Monday, but the Australian company was quick to shoot it down. "The board of Foster's believes the proposal significantly undervalues the company in the context of a change of control and, as such, it does not intend to take any further action," the group said.

If SAB Miller were to succeed in its pursuit of Foster's, it would be the industry's largest acquisition since InBev bought Anheuser-Busch, the maker of Budweiser, for $52bn in 2008.

SAB Miller, which was founded in South Africa in 1895 as South African Breweries, said its indicative offer was "attractive" for Foster's shareholders. The global giant pointed out that the price of A$4.90 it had offered represented a "significant premium" of 14.5 per cent to the share price of A$4.28 on 2 June, the closing price before the most recent round of speculation about a bid for Foster's.

Eddy Hargreaves, a brewing analyst at the stockbroker Collins Stewart, said the offer looked fair. "Our thesis on SAB Miller has been that Foster's at the right price is a good deal and this is broadly at a reasonable price," he said. In addition to the attraction of Australia's growing population, SAB Miller is also keen on Foster's because the country's economy is forecast to grow at 3.3 per cent over the next five years. The global brewer said Foster's was also "well postioned to benefit" from Asia's continued economic growth.

The Australian beer market is effectively a duopoly with the Japanese brewer Kirin, controlling 37 per cent of the sector after its acquisition of Lion Nathan in 2009.

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