Foster’s could demerge its beer and wine operations within 12 months, paving the way for a possible takeover of the Australian group’s beer business.
The company said six months ago it was not an “appropriate time” to sell or demerge its wine business, but it has structurally separated the poorly performing unit from its prized beer operations, which dominate the lucrative Australian market.
Analysts believe Foster’s will reconsider its position as improved capital markets revive takeover activity.
The wine business acts as a poison pill for would-be bidders for Foster’s beer business. SABMiller, the London-based brewer, and Japan’s Asahi are are seen as the most likely suitors.
Canadian brewer Molson Coors, which has merged its US operations with SABMiller, speaks for about 5 per cent of Foster’s equity. However, the Canadian group is not thought to be a likely bidder and its holding is considered strategic in the event of an offer.
Foster’s, which reports full-year results on August 25, has a market value of A$10.3bn (US$8.6bn). Merrill Lynch recently suggested the beer business had an enterprise value of some A$12bn due to its strong profits growth. Foster’s declined to comment.
In the first half of its fiscal year, Foster’s Australian beer sales volumes rose 3.1 per cent, driven by growth in premium beers like Carlton Dry Fusion and Crown Lager, while Australian beer earnings rose 5.6 per cent.
Martin Yule, analyst at Morgan Stanley, believes a full demerger of Foster’s beer and wine businesses could be achieved in 12 months. But he warned one hurdle to such a move would be the company’s almost $2bn in US dollar-denominated debt, which cannot be supported solely by its US wine assets.
SABMiller, which has an Australian joint venture with bottler Coca-Cola Amatil called Pacific Ventures that sells premium beers, wants a stronger foothold in the Australian market. However, neither SABMiller nor CCA are interested in wine.
Asahi Breweries, which held a stake in Foster’s in the 1990s, last year agreed to buy the Australian soft drinks business owned by the UK’s Cadbury for £550m ($909m).
Additional reporting by Peter Smith in Sydney
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