SABMiller bid rejected

Foster’s has rejected an AUD9.5 billion takeover bid from SABMiller claiming that the price “undervalues the company”.

As a result, Foster’s shares leapt to a 17 year high on the Sydney stock exchange and SABMiller saw the biggest drop on the FTSE this morning, down 2.5%.

SABMiller was allowed to go ahead with the bid after Coca-Cola Amatil made the necessary changes to the terms of its joint brewing venture with the London-based company.

If the deal had been approved, SABMiller stood to gain 50% of the Australian beer market.

A statement from Foster’s explained why the deal was rejected: “The board of Foster’s believes that 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 in relation to it.”

SABMiller chief executive, Graham Mackay, said that his company would continue to negotiate with the board at Foster’s to come to an arrangement.

“We continue to believe that the proposal price is attractive and offers good value to Foster’s shareholders,” he said.

Analysts are predicting that Foster’s will either be approached by a rival bidder with a new offer or that SABMiller will increase its bid. Robin Johnson, partner at international law firm Eversheds, said: “Brands are universal and brand value in the food and drink industry, particularly in brewing, is very high. Foster’s is a business which can offer potential buyers entry into new markets, not only Australasia, but also globally through a well known drinks brand.

“As a result, food and drinks brands have a significant premium and are much sought after as M&A targets. However, we are increasingly seeing brand owners outsourcing manufacturing and distribution and are moving towards a world in which brand owners are very separate from producers and distributors.”

Rupert Millar, 21.06.2011