Australia: Foster’s Group rejects proposal of wine unit acquisition, analysts positive about interest in its wine and beer business

Foster’s Group, Australia’s biggest brewer, said on September, 8 it has rejected a proposal for its soon-to-be demerged wine business, Treasury Wine Estates.

“The Board of Directors of Foster’s Group Limited has received an unsolicited expression of interest from an international private equity firm to acquire the wine assets of Treasury Wine Estates. The indicative, non-binding proposal involves a cash consideration of between A$2.3 billion and A$2.7 billion for 100% of the assets,” Foster’s official press release states.

“After considering the value range in the proposal, the Board of Foster’s continues to consider that a separation of the Wine business from the Beer business through a demerger is most likely to represent the best outcome for all Foster’s shareholders. In addition, the high level of conditionality, the requirement for exclusivity and other terms of the proposal are considered to reduce the value and certainty of the proposal.”

“The Board will continue to consider any proposal that is in the best interests of shareholders,” the company said.

The company rose to the highest in two and a half years in Sydney trading on speculation suitors will raise bids for its wine unit after the announcement.

Foster’s gained as much as 6.1 percent to A$6.44, the highest intraday price since Jan. 10, 2008, before trading at A$6.37 as of 1:18 p.m. in Sydney.

The company may spin off its wine business next year after A$2.7 billion of writedowns in the past decade almost halved the unit’s book value to about A$3.1 billion amid grape gluts and an appreciating Australian dollar. News reports have linked the company to potential offers from London-based SABMiller Plc., Japan’s Asahi Breweries Ltd., as well as China’s Tsingtao Brewery Co. and Bright Food Group Co.

“You may well see higher bids come through,” said Will Seddon, who helps oversee A$350 million at White Funds Management in Sydney, including Foster’s shares. “It’s a positive in that there is interest in the wine business as well as the beer business.”

08 September, 2010