SABMiller closes in on Foster’s with £7.3bn deal

SABMiller yesterday looked set to swallow Foster’s after the maker of Grolsch, Miller Lite and Peroni upped its takeover bid to value its Australian peer at A$11.5 billion (£7.3bn).

The new offer has won the backing of the Australian brewer’s board, just a week after Foster’s urged its shareholders to reject SAB’s “inadequate” offer.

London-listed SABMiller, which has since increased its offer price to A$5.53 per share after dividend payments are accounted for, is the world’s second-biggest brewer by volume and has global brands including Miller Genuine Draft, Peroni Nastro Azzurro and Pilsner Urquell.

After its initial rebuttal by the Australian beer giant, SABMiller threatened to go hostile in the takeover battle by approaching shareholders directly.

But peace broke out as SABMiller chief executive Graham Mackay offered to raise the cash bid and then sat down with Foster’s chairman David Crawford to celebrate with a beer.

“It became obvious that we were not that far apart so we started talking last week and this week I sat down with David Crawford for a couple of beers,” Mackay told a briefing after announcing the deal.

The group is interested in targeting Australia’s profitable beer market, in which Foster’s is the leading brewer with seven of the top ten beer brands, as well as a national distribution network and scale production.

Foster’s, which owns leading brands including Carlton Draught and VB, had become the subject of takeover interest after it sold off its under-performing wine business into a separately listed company in May.

Yesterday’s agreement is still the subject of approval by shareholders and regulators. The increased offer values Foster’s at A$9.9bn, though as part of the deal the Australian firm will also return A$0.30 a share as well as a final dividend for the year to 30 June, 2011. The total value of the deal, including debt, comes to A$11.5bn.

Mackay said Melbourne-based Foster’s, which is best known for the amber nectar advertisements, has a long-standing and proud reputation as one of the leading companies in Australia and an outstanding portfolio of brands. He added that it will become an important part of SAB.

The deal is expected to complete by the end of the year and will enhance SAB’s earnings in the first full year of ownership.

The Foster’s business which SABMiller is buying holds about half of Australia’s beer market and little else, having retreated home from the global beer empire it once held and having split off its wine operation.

The European rights to the beer are owned by Heineken, which brews and distributes Foster’s in most European countries. SABMiller already has rights to the Foster’s brand in India and the United States.

The Australian firm is being advised by Goldman Sachs and Gresham, an Australian boutique, while SABMiller’s advisers are JPMorgan, Moelis, Morgan Stanley and Royal Bank of Scotland.