Foster's plans cutbacks

SYDNEY - Foster's plans to close Southcorp's head office and may shut some wineries to cut costs if it succeeds with a A$3.1 billion ($3.36 billion) hostile takeover.

In a bidder's statement yesterday, the brewer said sales and administrative offices would be merged, which might lead to some job losses. Southcorp wineries in the Hunter Valley, Coonawarra and McLaren Vale were also likely to be affected.

Merrill Lynch analyst David Errington said in a report this week that Foster's needed to increase Southcorp's earnings before interest and tax by at least A$200 million a year to make the acquisition work.

Sydney-based Southcorp has rejected Foster's cash offer of A$4.17 a share as too low, saying it may be just an opening bid.

Foster's will also assume A$500 million of Southcorp's debt, taking the total offer to A$3.6 billion.

Southcorp is already closing wineries to reduce costs after a failed discounting strategy. Writedowns from Southcorp's acquisition of Rosemount led to a A$923 million loss in 2003.

Foster's said it had access to loans of as much A$2.7 billion to fund the acquisition.

- BLOOMBERG