The Indianpost

Foster’s poor results clear the way for SABMiller takeover

Analysts said a small increase to SABMiller’s A$4.90-a-share hostile offer could seal the deal after Foster’s did not impress with its full-year results or provide a plausible turnaround strategy.

Shares in Foster’s rose 2pc to A$4.99 cents – nine cents above last week’s hostile tilt from SABMiller – despite earnings falling 8pc to A$817.7m.

Analysts speculated that the lack of a detailed recovery program left the road clear for SABMiller to buy the Australian brewer, either as the current bid price or by a small increase to between A$5.10 and A$5.20-a-share.

Foster’s profits fell thanks to increased costs and a depressed beer market made worse by falling weak consumer confidence and the Queensland floods.

The company said it was committed to a A$500m share buyback scheme or capital reduction but most insiders said this would not be enough to ward off SABMiller’s advances. Investors said management had failed to go into “battle mode” with no clear strategy on how it would resurrect the fortunes of the all-important beer division.

Only last week, London-listed SABMiller went hostile with a second A$4.90-a-share tilt at Foster’s.

It also began preliminary arrangements for a $12.5bn (£7.6bn) syndicated loan to back its takeover. SAB, headed by South African Graham Mackay, is famed for its tough tactics.

The company is arranging the loan itself and has asked banks to commit $1.6bn each at around 90 basis points over LIBOR – a relatively cheap dollar denominated loan compared with European banks’ dollar funding rates.

The facility – which is yet to be finalised – includes an 18-month bridge loan for just over $8.5bn of bond issues.

Meanwhile, Foster’s chief executive John Pollaers said his company was about halfway through a three-year turnaround, with cashflows improving and cost cuts being reinvested to promote its brands. Mr Pollaers, the sixth chief of the beer group in seven years, made no mention of the SABMiller, instead saying: “The key point is that we’re getting on with business as usual. We are running Foster’s for the long term. We’re as well placed as anyone, and I would almost go as far as saying better positioned than anyone, to manage the interests of our shareholders.”

SABMiller, which makes Peroni, Grolsch and Miller Lite, has long been seen as the favourite to take over Foster’s, given the lack of potential rivals. Advised by JP Morgan Cazenove, RBS and Moelis, SAB has two months to send its bidders statement at the current offer price direct to shareholders.

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