Foster’s accepts SABMiller takeover bid

Australian brewer Foster’s has accepted a takeover bid from SABMiller.

Foster’s said the bid valued the company at AU$12.3 billion, with chairman David Crawford describing the proposal as “compelling”.

SABMiller chief executive Graham Mackay said: “We are pleased that we have reached agreement on a recommended transaction to be put to Foster’s shareholders.

“Foster’s will become an important part of our business, and through the application of our commercial capabilities and global scale, we expect to build on the initiatives that Foster’s management has put in place, further enhancing Foster’s performance and creating value for our shareholders.

“We look forward to working with Foster’s employees and other stakeholders to ensure the success of Foster’s in the future as the largest brewer in Australia with an outstanding portfolio of brands.”

Crawford added: “This is a compelling proposal from SABMiller and represents the value inherent in this iconic Australian company and its brands and people.”

A company statement said: “The directors of Foster’s have unanimously recommended that shareholders vote in favour of the scheme of arrangement and capital reduction, and have committed to voting their own interests in favour of the proposals, in the absence of a higher valued competing proposal and subject to an independent expert confirming that the proposal is in the best interests of Foster’s shareholders.”

Foster’s said the offer valued the group at AU$12.3bn on an enterprise value basis.

However, SABMiller said its bid valued Foster’s equity at around AU$9.9bn, and had an enterprise value of AU$11.5bn. The difference in valuations by the two companies appears to be due to different calculations of Foster’s net debt.

In June, the Foster’s board rejected a AU$4.90-a-share offer from SABMiller, arguing the bid — which priced Foster’s at about AU$9.5bn — undervalued the company.

The news brings to an end one of the most protracted takeovers in the drinks industry in recent years. Rumours that SABMiller was ready to swoop for Foster’s emerged as long ago as August 2010.

Foster’s now expects the deal to be completed by the end of the year.

From SABMiller’s perspective, the logic behind the deal is partly to ensure exposure to the successful Australian economy, which incorporates a hefty beer market, while the huge scale of SABMiller – the second largest drinks company in the world – will, it is hoped, provide chances to cut costs.

However, the Australian beer market has not been particularly buoyant of late, with both a consumer downturn and a poor summer contributing to falling sales over the past year.

Crawford, however, believes that the tide is turning.

“The market decline has begun to moderate in recent months, and we expect continued improvement,” he said in Foster’s 2011 annual report.

“The long-term fundamentals of the beer and cider categories in Australia remain strong, and once through the current period of economic uncertainty, we are confident that the beer category will return to its long-term trend of modest growth.”

SABMiller says the bid is part of its strategy of creating an attractive global spread of businesses to add to its operations largely in the emerging markets of Africa, Latin America, Asia and Eastern Europe.