Australian beer and wine group Foster’s has rejected a proposed takeover offer by London-based drinks giant Sabmiller (LON:SAB) valued at $4.90 per share, or A$9.5bn (£6.2bn). The approach is part of SABMiller’s strategy to create an attractive global spread of businesses, with a focus on developing strong and successful brand portfolios. Australia has a strong, wealthy and growing economy with consistent long term population growth in key demographics, and is well positioned to benefit from continued economic growth in Asia. Australia has a profitable beer market in which Foster’s is the leading brewer with seven of the top ten beer brands, a national distribution platform and scale production.

Foster’s said the offer “significantly undervalues the company in the context of a change of control and, as such, it does not intend to take any further action in relation to it”. Earlier, SABMiller said it would use its expertise, best operating practices, management experience and global scale to enhance Foster’s leadership position, strengthen and develop the Foster’s brand portfolio and improve Foster’s operations and profitability. The SABMiller proposal is understood to have been sent to the chairman of Foster’s, David Crawford, on 20 June 2011 with the objective of reaching agreement on the implementation of a scheme of arrangement. The SABMiller share price fell by 2% to 2,138.50p during early trading.

The way was cleared for SABMiller's proposal after the group secured a separate agreement with Coca-Cola Amatil Ltd to acquire its share of the Pacific Beverages Pty Ltd joint venture should it acquire a controlling interest in Foster’s.

In May 2010, Foster’s announced that it was evaluating structural separation and separate stock exchange listings for its Beer and Wine businesses. At the time, the group said it was increasingly seeing the benefits of separating the beer and wine businesses because of their differing strategic and operating characteristics. The group said a demerger would give investors more transparency and greater choice and each business would have more flexibility to develop its own corporate strategies.

SABMiller said it believed that its proposal to acquire the entire group, which represents an enterprise value for Foster’s of A$11.2bn and an F11 forecast EV/EBITDA multiple of 12.5 times, would be attractive to Foster’s shareholders. The price represents a premium of 14.5% to the trading price of Foster’s of A$4.28 as at 2 June 2011…

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