Foster’s turns down new SABMiller bid

 
City A.M. Reporter
AUSTRALIAN brewer Foster’s yesterday rejected a $10bn (£6.1bn) offer from rival SABMiller for the second time as shareholders hold out for a better offer from the global brewing giant.

SABMiller announced on Wednesday it would go directly to shareholders to gain about half of Australia’s beer market, with a repeated offer of A$4.90 a share.

But Foster’s said yesterday the offer significantly undervalues the company. Shares in the brewer, which is expected to report flagging profits on Tuesday, rose as high as A$5.03 yesterday before closing at A$5.00.

“They are doing the right thing. They probably will get a better price sometime down the track and this strategy is probably the right one,” said Craig Young, portfolio manager at Tyndall Investment Management.

“The market thinks that a better price will be forthcoming. It expects something above A$5 and decently above A$5. So you’re talking A$5.10, A$5.20, maybe even as high as A$5.30,” he said.

SABMiller, which makes Peroni, Grolsch and Miller Lite, has long been seen as the favourite to take over Foster’s since rivals such as Heineken are struggling with debt or lack adequate funding.

Foster’s boasts high margins and a dominant position in Australia, although beer volumes have sagged recently with a poor summer and consumer downturn.

SABMiller could have strengthened its hand by waiting longer to make a direct offer in the absence of a rival, shareholders said, signalling an improved bid may emerge.