SABMiller set to continue Foster's pursuit

Beer giant SABMiller yesterday said it would keep up its pursuit of rival Foster's after the Australian brewer rejected an initial £6.2 billion bid.

Analysts expect that SAB may raise its offer price in a process that could see other global drinks firms place rival bids for Foster's, which is seen as one of the last large takeover targets in a consolidating market.

Melbourne-based Foster's told SAB that its conditional proposal of A$4.90 (320p) a share, representing an 8 per cent premium on yesterday's stock market price, "significantly undervalued" the business. The offer valued the company at 6.2bn.

SAB is the world's second-biggest brewer by volume and has global brands including Pilsner Urquell, Peroni Nastro Azzurro and Miller Genuine Draft.

It said its proposal was driven by 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.

Chief executive Graham Mackay said: "We continue to believe that the proposal price is attractive and offers good value to Foster's shareholders."

He added the company would continue to seek talks with the Foster's board and deliver an agreed proposal for consideration by the company's shareholders, but he said there was no plan to approach investors directly with a hostile bid.

Foster's became the subject of takeover speculation after it sold its under-performing wine business into a separately listed company in May. Analysts said that other global brewers were now likely to be mulling their options, but London-listed SAB is still seen as the most likely candidate to eventually buy Foster's because its relatively low debt levels allow it to borrow more.

Yesterday the cost of securing SAB's debt against default rose, as its plans to fund the takeover using a combination of existing resources and new debt would add considerably to the company's leverage.

Gregory Lafitte, analyst at Louis Capital Markets, said: "Obviously SABMiller will not burn all their bullets in the first step. They still have resources to increase the price."

Foster's shares jumped 14 per cent to A$5.16, a nine-month high and above SAB's offer price.