Foster's knocks back $12.4b buyout offer

Foster's has about half the Australian beer market. Photo / Richard Robinson

Foster's Group, Australia's biggest brewer, has rejected an unsolicited A$9.5 billion ($12.4 billion) conditional cash takeover offer from SABMiller as too low.

The non-binding approach, at A$4.90 a share, "significantly undervalues" the company for a change of control, and Foster's would not take further action on it, the Melbourne-based brewer said yesterday.

The offer is 8.2 per cent higher than Monday's closing price.

The bid is the first announced by Foster's since it became a beer-focused company last month through the spinoff of its wine unit. The 8.2 per cent premium offered by London-based SABMiller compares with an average of 13.4 per cent for brewery deals pending and completed in the past five years, according to data compiled by Bloomberg.

"I'd guess that there's room to go higher if you compare them to some recent deals," said Will Seddon, who helps oversee more than A$350 million at White Funds Management in Sydney.

Fosters "will just stick to the line that it undervalues the company. There have been a whole lot of transactions in that space in recent years, many of which were done at pretty high multiples," he said.

Kirin Holdings paid a 44 per cent premium for the 54 per cent of Lion Nathan it didn't already own in 2009 in a deal that gave it full ownership of Australia's second-largest brewer.

Grupo Modelo SAB de CV, the maker of Corona, discussed with its board of directors a proposal to make a joint bid with Molson Coors Brewing for Foster's, a source with knowledge of the matter said.

Goldman Sachs and Gresham are advising Foster's. JPMorgan Chase is advising SABMiller.

Foster's, which has about half the Australian beer market, gets more than 90 per cent of sales from brewing after spinning off Treasury Wine Estates into a separately traded company last month.

Its brands include the top-selling Victoria Bitter as well as its namesake lager.

SABMiller already has a beer business in Australia through its Pacific Beverages joint venture with Coca-Cola Amatil, the nation's biggest soft drink maker. Earlier yesterday, Coca-Cola Amatil amended the venture to enable SABMiller to bid for Foster's and buy out the Coke bottler's share of the business.Bloomberg