MELBOURNE, Australia -- Foster's Group Ltd. is advising its shareholders to reject SABMiller plc's August 17 takeover offer. "The board of Foster's, together with its advisers, has carefully considered the proposed offer and intends to unanimously recommend shareholders reject the offer. The board of Foster's reiterates its belief that an offer price of $4.90 [Australian, $5.17 U.S.] per share significantly undervalues the company in the context of a change of control. In addition, the high level of conditionality further detracts from the proposed offer."
It added, "Foster's shareholders [image-nocss] are advised to take no action and ignore all documents and communications from SABMiller in relation to its proposed offer."
Several Foster's shareholders said it was unlikely that they would accept SABMiller's bid, reported The Wall Street Journal.
"Our opinion is that the $4.90 less the final dividend is unlikely to tempt Foster's shareholders, including ourselves, at this point," Matt Williams, fund manager at Perpetual Ltd., which holds Foster's shares in its Australian Equities Fund, told the newspaper. "The players have taken to the field and the ball's been kicked off, but it will be a long game," he said.
Foster's largest shareholders as of its 2010 financial report were the Capital Group, Blackrock Investment Management and Deutsche Bank AG, according to market-data provider IRESS.
"At this stage, I don't think people would view the bid as compelling and I suspect most investors would be sitting on their hands," said Angus Gluskie, managing director at White Funds Management, which holds Foster's shares. The moves by SABMiller's executives "start to put them in a position where, by bypassing the board, they could now push the bid from here on and possibly, at a later stage, maybe sweeten up the bid in order to get the deal across the line," he said.
Foster's plans this week to report earnings for its fiscal year ended June 30. "It doesn't help Foster's board that the earnings will be weak, it's not going to help them at all," Simon Rutherfurd, chief investment officer at Northward Capital, told the paper. "They're going to have to tell a pretty good story about the growth in the recovery and earnings. They're going to have to work that much harder when they've got the gorilla on the doorstep."
Given a declining market for beer in Australia, some analysts said shareholders should seriously consider the A$4.90 offer. "Based on what we know about the company, its brands and the market, we do not believe that Foster's is worth $4.90 per share," Macquarie analyst Greg Dring said in a note cited by the Journal. "We recommend accepting the offer."
London-based SABMiller is one of the world's largest brewers with brewing interests and distribution agreements across six continents. The group's portfolio includes global brands such as Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine Draft and Grolsch, as well as leading local brands such as Aguila, Castle, Miller Lite, Snow and Tyskie. The group is also one of the world's largest bottlers of Coca-Cola products.
Melbourne, Australia-based Foster's Grop makes Foster's Lager, 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.
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