Fosters rejects £1.6bn wine bid but move prompts takeover talk

Published on Tuesday 7 September 2010 22:33

Foster's, Australia's largest brewer, has rejected a private equity offer worth up to $2.5 billion (£1.6bn) for its wine business - which includes Penfolds and Wolf Blass - as too cheap, sending its shares up as much as 6 per cent on hopes of higher bids.

Investors were surprised by the approach for the world's second-largest wine business, which has cost Foster's billions of dollars in writeoffs and is now being split from the lucrative beer business.

The bid also raised speculation that suitors for the combined group, which has a market value of about $11bn, might now step forward.

Tom Elliott, managing director of hedge fund MM&E Capital, said: "This puts the whole company in play. If you are one of the big brewers, you probably didn't want to be saddled with a wine business you didn't understand or want.

"Now you know there are potential buyers out there, you can make a bid for the whole company knowing that you can offload the wine business to private equity or someone else."

Investors have been focusing on potential buyers for the beer business, which enjoys some of the highest profit margins in the brewing world.

Sources last month said brewing groups London-listed SABMiller and Japan's Asahi Breweries were looking at the company's beer operations, valued at more than $10bn, but no firm bids have emerged.

The ailing wine business - with vineyards from California's Napa Valley to the Hunter Valley near Sydney - had been seen as the unwanted child and Foster's yesterday said it would continue to work on splitting the beer and wine units. It did not identify the private equity company that made the approach.

Analysts said the low private equity bid indicated that chief executive Ian Johnston - Australia's youngest ever Olympian - may well end up selling both the wine and the brewing business in the months ahead.