Foster's rejects $10 billion SABMiller bid

SAB Miller said it would keep talking to Foster's Group after Australia's largest brewer rejected the global giant's A$9.5 billion ($10.1 billion) cash take-over offer as too low. Chief Executive Graham Mackay told analysts that SAB had not shown any intention of going hostile in what could be the industry's biggest acquisition since InBev bought Anheuser-Busch for $52 billion in 2008.
"This is a proposal to Foster's board, we expect to engage. This is not a hostile offer and we have given no indication we would move that way," Mackay said in a webcast. Mackay made no reference to whether SAB, the world's second biggest brewer, would improve its A$4.90 per share proposal, but Foster's shares surged 14 percent on the news to a nine-month high of A$5.16 as investors predicted it would.
"This is probably round one," said Jason Beddow, chief executive at Australia's ARGO Investments, which holds Foster's shares. "(SAB) is a big global player and this is a very good margin versus its peers." Mark Kelly, an event driven strategist at London's Olivetree Securities, said that Foster's shareholders would probably put pressure on the management team to talk to SABMiller.
"It is not a dream deal, but there is potentially value on the table for both sides," he said, adding that a revised offer north of A$5.50 would leave SABMiller "open to accusations of overpaying". Foster's, one of the last big prizes in a consolidating global beer market, has high margins and a 50 percent market share in Australia, where it brews the Victoria Bitter and Pure Blonde brands.
World brewers, juggling rising raw materials prices and slowing growth in mature markets, are seeking growth elsewhere and a number of smaller brewers are expected to be swallowed up. SABMiller, which makes Peroni, Grolsch and Miller Lite, has long been seen as the favourite to take over Foster's, since rivals such as Heineken are struggling with debt piles or lack adequate funding.
Heineken's Chief Financial Officer told Reuters its focus outside Europe was on emerging markets, appearing to rule out a counter-bid for Foster's. "The expansion we do outside Europe will be in emerging markets," Rene Hooft Graafland said in an interview on Tuesday. He declined to comment directly on any bid for Foster's.