Foster's, owner of Australia's largest brewer Carlton and United Breweries, also said half-year profits were down 12 percent as domestic beer sales slumped, especially in the flood-hit state of Queensland.
Foster's reported first-half net profit of Aus$312.1 million ($313.0 million), down from Aus$355.7 million a year earlier.
The demerger, first proposed last May, will result in a new company, Treasury Wine Estates, being listed alongside Foster's on the Australian stock exchange. Foster's shares were flat at Aus$5.74 at 12:00 pm (0100 GMT).
"Fosters has completed a detailed evaluation of the issues, costs and benefits of the demerger, and the board unanimously considers that the demerger represents the best path forward and is in the best interests of Foster's shareholders," Chairman David Crawford said.
"The board has formed the view that further benefits will result from a complete separation and now is the right time to pursue a demerger of Treasury Wine Estates from Foster's," he added.
Foster's, whose wine labels include Wolf Blass and Penfolds, has been hit by a glut of production in Australia, while the soaring local dollar has made exports more expensive for foreign customers.
Last year, chief executive Ian Johnston said a quarter of Australia's vines should be destroyed to reduce the oversupply.
Meanwhile the company is battling intense competition in the beer industry, affecting its flagship brands VB, Crown and Carlton Draught. Foster's estimated the domestic beer market shrank 7.0 percent in the second half of 2011.
Foster's is likely to field new bids after the demerger is completed in May, subject to shareholder and court approval.
In September, it rejected a private equity firm's offer worth up to Aus$2.7 billion for its wine assets, but said it would consider other bids.
Under the demerger, shareholders will receive one Treasury Wine Estates share for every three Foster's shares, while retaining the Foster's shares.
"The demerger will allow Foster's shareholders to benefit from owning Treasury Wine Estates shares and to participate in any value creation within that business, including from improved market conditions in the wine category," Crawford said.
Foster's said volumes were down 5.3 percent and net sales revenues were also 6.6 percent lower than a year earlier at Aus$2.15 billion. It will pay a first-half dividend of 12 cents, unchanged from a year ago.