Business / International
SABMiller's pursuit of Foster's turning ugly
17 Aug 2011 at 10:42hrs | Views
Two months after making its first foray, SABMiller's multi-billion dollar pursuit of Foster's is starting to turn ugly.
Following a firm rejection from Foster's management on June 21 after it made a A$4.90 a share offer, SABMiller–the world's second-biggest brewer by volume after Anheuser-Busch InBev–has now taken its A$9.51 billion ($9.97 billion) offer directly to shareholders of the iconic Australian brewer.
The board of Foster's rejected SAB's initial A$9.5bn ($10bn) offer in June, saying it was too low. SAB, which owns brands such as Grolsch and Peroni, said the bid was attractive and should be put to shareholders.
The conditional, off-market cash bid, funded via existing resources and new debt, is contingent on getting at least 90% of all Foster's outstanding shares.
On making its first approach, SABMiller's Chief Executive Graham Mackay dismissed outright suggestions the bid could turn unfriendly. "We expect to engage with [the board]. This is not a hostile offer to shareholders," he said in an investor call.
After failing to get Foster's to the negotiating table, that stance has changed.
SAB said in a statement today that it has gone hostile because Foster's board has shown "no willingness to engage." The Melbourne-based maker, which is Australia's biggest brewer by sales with 24 beer brands, including market leading Victoria Bitter, had said the offer- valued at 12.5 times June 2011 earnings before interest, taxes, depreciation and amortization and an 8.2% premium to the closing stock price prior to the first bid–"significantly undervalues" the company.
Foster's shares, which have largely traded above the initial offer price, save for some dips due to recent market volatility, closed Wednesday at A$4.96.
Wednesday's development leaves no room for doubt about SABMiller's determination to complete the deal. In the weeks since it made its first approach, it has quietly consolidated its investment position and lined up financing in preparation for a new attempt.
The London-based brewing giant, maker of Miller Lite, Peroni and Grolsch, is keen to extend its proportional reach out of the fast-growing emerging markets like Latin America, Africa and Eastern Europe which bring in 80% of its profits, by building its position in developed consumer economies. Its dominant emerging economies footprint compares with around 50% recorded by its rivals.
It also expects Australia's growing economy to continue to benefit from booming growth in Asia, where rising incomes and a thirst for a Western lifestyle are fuelling demand for consumer products.
Following a firm rejection from Foster's management on June 21 after it made a A$4.90 a share offer, SABMiller–the world's second-biggest brewer by volume after Anheuser-Busch InBev–has now taken its A$9.51 billion ($9.97 billion) offer directly to shareholders of the iconic Australian brewer.
The board of Foster's rejected SAB's initial A$9.5bn ($10bn) offer in June, saying it was too low. SAB, which owns brands such as Grolsch and Peroni, said the bid was attractive and should be put to shareholders.
The conditional, off-market cash bid, funded via existing resources and new debt, is contingent on getting at least 90% of all Foster's outstanding shares.
On making its first approach, SABMiller's Chief Executive Graham Mackay dismissed outright suggestions the bid could turn unfriendly. "We expect to engage with [the board]. This is not a hostile offer to shareholders," he said in an investor call.
SAB said in a statement today that it has gone hostile because Foster's board has shown "no willingness to engage." The Melbourne-based maker, which is Australia's biggest brewer by sales with 24 beer brands, including market leading Victoria Bitter, had said the offer- valued at 12.5 times June 2011 earnings before interest, taxes, depreciation and amortization and an 8.2% premium to the closing stock price prior to the first bid–"significantly undervalues" the company.
Foster's shares, which have largely traded above the initial offer price, save for some dips due to recent market volatility, closed Wednesday at A$4.96.
Wednesday's development leaves no room for doubt about SABMiller's determination to complete the deal. In the weeks since it made its first approach, it has quietly consolidated its investment position and lined up financing in preparation for a new attempt.
The London-based brewing giant, maker of Miller Lite, Peroni and Grolsch, is keen to extend its proportional reach out of the fast-growing emerging markets like Latin America, Africa and Eastern Europe which bring in 80% of its profits, by building its position in developed consumer economies. Its dominant emerging economies footprint compares with around 50% recorded by its rivals.
It also expects Australia's growing economy to continue to benefit from booming growth in Asia, where rising incomes and a thirst for a Western lifestyle are fuelling demand for consumer products.
Source - SABMiller
