Foster’s wine in the sights of US private equity businesses

City A.M. Reporter
PRIVATE equity firms Kohlberg Kravis Roberts and TPG have held early talks about teaming up to bid for the wine unit of Australian brewer Foster’s.

The pair are yet to decide whether to proceed either together or separately, according to reports in Australia.

In 2007, KKR and TPG united to take Texas-based Energy Future Holdings, formerly TXU, private in the largest leveraged buy out ever.

The latest talks come after Foster’s rejected a private equity offer this month worth up to
$2.5bn (£1.6bn) for its underperforming wine business, saying the bid was too cheap.

Foster’s wants to continue with plans to separate its beer and wine businesses, with top brands including Penfold’s, Beringer and Wolf Blass, after spending around A$7bn (£4.2bn) buying wine assets at the top of the market.

The wine business, rebranded as Treasury Wine Estates, is seen as attractive to buyout firms because of depressed earnings at the weak point of the wine-making cycle, and strong brands.

TPG had held about 55 per cent of Beringer with some partners when it sold to Foster’s
in 2000.

Last year KKR bought the South Korean subsidiary of Oriental Brewery from Anheuser-Busch InBev.

Meanwhile, SABMiller, one of the world’s largest brewers, was reportedly mulling a $10.9bn acquisition of Carlton and United Breweries (CUB), the beer making arm of Fosters Group Ltd.

However, no official offer has been forthcoming.