SABMiller talk boosts Fosters

Speculation that SABMiller has been cleared to launch a bid for Foster’s beer arm sent shares in the Australian group up by over 4% this week as the market increasingly anticipates the sale of Foster’s beer operations.

Foster’s plans to split its beer and wine operations into two units this year and is expected to attract interest from potential trade buyers and private equity firms for the businesses, although it has only received one formal offer for its smaller wine business so far.

SABMiller had spent the last few months working with lawyers to overcome legal and commercial obstacles to a potential bid because of its existing joint venture in Australia with Coca-Cola Amatil, a report in the Sydney Morning Herald said on Monday.

Foster’s shares have suffered in recent months, falling by around 10% since September, but the increased speculation saw them rise 4% to AUD$5.72 on Monday.

Foster’s board is expected to officially back plans for the split, which would be announced with the release of its half-year results on 15 February.

SABMiller is believed to be just one party looking at the Foster’s operations, along with a number of other trade buyers and private equity firms.

Foster’s last year rejected a bid for its wine business from Cerebrus Capital Management. Insiders have also suggested buyout firms Kohlberg Kravis Roberts and TPG Capital were also interested.

Speculation about bidders for the larger beer business, which is valued at around AUD$10 billion, has focused on SABMiller, although an offer was seen being complicated by the joint venture, with analysts suggesting it could not bid without getting Coca-Cola Amatil involved.

The Sydney Morning Herald report said, however, that any potential obstacles had now been cleared, leaving the path clear for SABMiller to launch its bid.

Meanwhile speculation continues to surround the future of Foster’s Treasury Wine Estates division, though the company is yet to recieve any new offers.

Alan Lodge, 26.01.2011