Reports suggest Foster’s looking to defend itself from takeover

Posted by Daniel Palmer on 3rd October 2008

Foster’s has reportedly hired an advisor to shield them from possible takeover predators.

Speculation has been rife that Australia’s largest brewer would be subject to takeover bids as the beer industry continues to go through a major consolidation phase. Among this year’s major deals have been the combination of the world’s second and third largest brewers, InBev and Anheuser-Busch, the purchase of Scottish & Newcastle by Heineken and Carlsberg and the merger of the US operations of Molson Coors and SABMiller.

SABMiller is considered one of the leading candidates, with their shares soaring amid rumours of a play for Foster’s. Heineken has also been mooted as a possible player, but their recent purchase of Scottish & Newcastle is likely to limit their ability to purchase the Australian-based operator; with Molson Coors another linked to the Australian giant.

SABMiller already have strong links to Foster’s, as they own the Foster’s brand in India and have the licence to the brand in the US. They entered the Australian market via a joint venture with Coca-Cola Amatil in 2006, Pacific Beverages, with the company in charge of distributing the Peroni Nastro Azzurro, Miller Genuine Draft, Pilsner Urquell, Miller Chill and Bluetongue products within Australia.

Heineken gained access to the Foster’s brand in Europe, with their purchase of Scottish & Newcastle earlier this year and were strongly linked to a takeover of Foster’s back in 2001.

A banking source has informed Reuters that Foster’s has hired Goldman Sach JB Were to assist with a defence strategy, in the wake of last week’s news that Deutsche Bank had acquired 5.26% of Foster’s. Deutsche Bank have remained coy about the owner of their stake, but they have worked with both SABMiller and Molson Coors before, which has led to the speculation that they may make a bid.

Foster’s are currently completing a review of their operations, with their widely anticipated Wine Review due to be completed in the first half of Fiscal 2009. They have previously suggested talks of a takeover or a demerger of their wine and beer businesses are premature, with new CEO Ian Johnston last week advising that he believed the company has “strong fundamentals” and was looking forward to “building on these strengths while improving business performance”.

Foster’s would have paid close attention to this year’s Anheuser-Busch takeover, where the US market leader was caught out by a bid by Belgian brewer InBev. The Anheuser-Busch Board rejected the first offer and, just as the takeover threatened to go hostile with both sides filing lawsuits, Anheuser-Busch agreed to a sweetened offer.

Some analysts have questioned the likelihood of a bid at the moment given the high cost of credit, with the supposed appointment of a defence advisor by Foster’s likely to be a move to ensure they are not ‘blind-sighted’ if a bid does eventuate.