Takeover speculation surrounds Foster’s

Foster’s share price leaped earlier this week as speculation mounted regarding a prospective A$11bn takeover bid from InBev or SABMiller. Rumours of a bid fuelled by a report in the Sydney Morning Herald pushed the Australian beer and wine producer’s share price up by 9.2% to A$5.95 on Tuesday – the largest daily gain since 1990.

However, City commentators have attributed this price leap to the company’s positive financial results, which defied expectations and were reported on the same day. The successful integration of Southcorp, which Foster’s purchased last year for A$3.2bn, may also have contributed to the price rise.

As well as expanding its wine operations, Foster’s has spent the past year strengthening its dominant position in the Australian beer market while divesting its assets outside Australia.

Although both InBev and SABMiller have expressed an interest in increasing their presence in the Asia-Pacific market, some analysts question the logic of either brewer acquiring a company where wine accounts for 85% of operating net assets.

Foster’s announced a rise in net operating profit from A$540m to A$623.1m and said it would be re-launching Rosemount, one of Southcorp’s leading wine brands, later on this year.

© db 30th August 2006