Foster's Rejects SABMiller Bid

Says $10 billion proposal "significantly undervalues" Australian brewer

MELBOURNE, Australia -- Foster's Group Ltd. has rejected an "unsolicited, incomplete, nonbinding and conditional" bid proposal of $9.5 billion (Australian; $10 billion U.S.) or $4.90 cents (Australian) per share from SABMiller plc to acquire all of the shares in Foster's.

"The board of Foster's believes that the proposal 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," the Melbourne, Australia-based brewer said in a media announcement.

Foster's announcement came [image-nocss] after beverage group Coca-Cola amended the terms of a brewing joint venture with SABMiller, which enabled SABMiller to bid for Foster's, reported the Associated Press.

The bid represents an 8% premium on Foster's last trading price of $4.53 per share.

After the announcement, Foster's shares jumped on the Australian market 13% to $5.12, its highest price since February 2007.

The proposal to acquire Foster's is in line with SABMiller's strategy to create an attractive global spread of businesses, with a focus on developing strong and successful brand portfolios, it said in its own announcement regarding the bid, prior to Foster's rejection. 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 10 beer brands, a national distribution platform and scale production.

SABMiller has a track record of integrating brewing companies and improving the operating and financial performance of acquired businesses, it said. SABMiller would use its expertise, best operating practices, management experience and global scale to enhance Foster's leadership position, strengthen and develop Foster's brand portfolio and improve Foster's operations and profitability.

The SABMiller proposal was sent to David Crawford, chairman of Foster's, on June 20 with the objective of reaching agreement on the implementation of a scheme of arrangement, SABMiller said. The proposal was subject to a number of conditions including satisfactory due diligence, agreeing the terms and conditions of a scheme implementation agreement and Foster's board support.

As previously announced by Coca-Cola Amatil Ltd., SABMiller has separately reached agreement with Coca-Cola Amatil Limited to acquire its share of the Pacific Beverages Pty Ltd. joint venture should SABMiller acquire a controlling interest in Foster's.

Before the rejection by Foster's, SABMiller CEO Graham Mackay said, "SABMiller has a proven track record of acquiring and integrating brewing companies in a way which benefits shareholders, employees, business partners and the broader community. We aim to strengthen the Foster's brand portfolio and work with the local team to bring our innovation, global scale and expertise to the business. We continue to believe that the proposal price is attractive and offers good value to Foster's shareholders. SABMiller can conclude a transaction quickly and will continue to seek engagement with the board of Foster's to put an agreed proposal to Foster's shareholders."

Market analyst Peter Esho said other global brewers would be running the numbers on Foster's after its rejection of SABMiller's bid. "If Foster's thinks the deal is undervalued, it needs to really convince the market that 2012 estimates for net profit of $933 million are too low," Esho told AP. "Until then, SABMiller can sit in the box seat and play its hand."

Foster's Lager is Australia's original, full-strength lager, famous for the slogan "Australian for Beer." Created by the Foster Brothers in 1887, this lighter European-style lager is distributed in more than 150 countries. Foster's Lager is sold in the United States through a partnership with Miller Brewing Co. The Foster's name also appears on the low-alcohol Foster's Light Ice. Other brands include Carlsberg and Corona Extra.