Melbourne: SABMiller’s $10 billion bid for Australian brewer Foster’s Group looks set for success as key shareholders backed the sweetened deal on Thursday with only an outside chance of a rival offer now posing a threat.
Foster’s agreed to accept SABMiller’s A$5.10 a share offer, a 20 cent-a-share increase on a previous offer, after a three-month battle by SABMiller to win over management at the Australian brewer. Foster’s, maker of Victoria Bitter, Carlton Draught and Pure Blonde, will also undertake a 30 cents-a-share capital return and pay a final dividend of 13.25 cents under the deal.
“It’s a good result,” Matt Williams, Australian equities manager at fund manager Perpetual, told the news agency. Perpetual holds around 3% of Foster’s. “In the absence of a higher bidder, it will certainly win out,” he said.
Foster’s shares jumped 8% to A$5.28 on the deal, the highest level in almost four years.
SABMiller’s chief executive, Graham Mackay, expects the London-listed firm’s biggest ever takeover deal to close by the end of the year and put it at the head of the Australian beer market with a near 50% share.
SABMiller brews Peroni, Miller Lite and Grolsch.
Foster’s is seen as attractive with its high profit margins, due to its virtually duopoly with Kirin-owned Lion Nathan.
Jason Beddow, chief executive at Foster’s shareholder ARGO Investments, said SABMiller “played it reasonably smart” and it was “increasingly unlikely” a competitor would enter the fray.
No rival bidders seen
Japan’s Asahi Breweries earlier said it was not planning to buy any part of Foster’s while China’s Tsingtao Brewery Co said it was not bidding. Speculation about a joint bid by Grupo Modelo SAB de CV and Molson Coors Brewing Co also faded due to the complexities involved in such a deal.
The bid for Foster’s comes after it lost market share and underwent a management shake-up. The push to multi-year highs in the stock contrasts with a broader Australian market down 16% so far this year .
“In this environment, a bump in the bid with what’s happening globally is probably going to be successful. Short of someone else coming out of the woodwork, it might be enough,” Beddow of ARGO Investments said.
Ratings agency Standard & Poor’s said that if the takeover is completed as proposed, Foster’s BBB long-term rating is likely to be raised by one notch or affirmed.
The deal is worth A$5.53 a share to stakeholders, factoring in the capital return and a dividend, Williams at fund manager Perpetual calculated. “It will win the day in the absence of (Grupo) Modelo or another coming along,” said Williams, who had been vocal in rejecting the earlier bid and backed Foster’s in its decision to hold out for a better offer. “We weren’t willing to sell it at A$4.90. I was not going to sell it at that price,” he said.
If Foster’s agrees to a higher rival bid within 12 months, it has agreed to pay SABMiller a break fee of A$99 million ($100 million).
SABMiller is being advised by JP Morgan, RBS, Morgan Stanley and Moelis in the deal, while Foster’s is advised by Goldman Sachs, Gresham and Allens Arthur Robinson.