Foster's billion dollar surge into the North American wine market has not made it popular with institutional investors who are losing a solid, dependable company to one paying through the nose to become a global power.

The Foster's Brewing Group has suffered, like many traditional manufacturing companies, over the last few years as the high-tech sexy stocks have raced ahead leaving the laggards scrambling for schemes to boost their shareprices.

In Europe this has taken the form of mergers or demergers where brewing companies have been forced to make radical changes in direction - and personnel. Beer groups in the rest of the world are following in a desperate attempt to keep shareholders, used to stellar performance from dotcoms, happy.

Foster's Australasian rival Lion Nathan has bemoaned on many occasions this year that despite solid and sensible growth its shareprice is not reflecting its position in its markets. Lion Nathan has resorted to setting up an online ordering alliance to slash costs and increasing its stake in wine group Montana.

Foster's has gone further. A lot further. At the end of August it announced the A$2.6 billion purchase of the Napa Valley's Beringer group in a deal that staggered the Sydney stockmarket.

Shareholders have not responded well. Foster's was buying back $120m worth of stock and had a gearing of 54%. It was run by president and CEO Ted Kunkel, who many believed would just hold tight till retirement. It was a sensible stock for any portfolio. Nothing amazing but likely to keep paying reasonable dividends.

But Kunkel, seeing the changes in Europe, has obviously decided to act sooner rather than later. "The acquisition of Beringer represents the beginning of a new era at Foster's. We are now what we have aspired to be for some years - a truly global premium beverage company," he said.

Foster's now has 100% gearing and rather than buying back shares has raised $700m by increasing its shares on issue by 15%. This deal marks a complete U-turn from reliable but boring, to far-sighted and the shareholders don't seem too happy that they are paying for the change in direction.

The shareprice collapsed from $4.40 and hovered around the $4 mark after the deal was announced. It has slowly been recovering but is still struggling below $4.30 - a long way off the $4.60-$4.70 range it was happily hitting earlier in the year.

This is a classic case of management and shareholders differing in opinion. Most shareholders were content to hold the stock and wait for the big US or European brewers to come sniffing; offer mega-bucks and then flog off Foster's ancillary divisions making even more mega-bucks. But Kunkel shows no sign of settling for this scenario and has instead offered a lot of money to move further into the wine market - the only area of the alcoholic drinks sector offering decent growth prospects. (In the US the $8 to $12 a bottle market is growing 10 per cent a year.)

Foster's is moving from an 80/20 beer/wine split to 60/40 in five years and is also spreading its geographical sphere. Oz accounts for 90% of earnings but in five years it will be down to 60%.

There are no synergies and no cost cutting available from this deal. It is all about moving into new growth markets and, ultimately, long-term survival as an independent company.

Kunkel has refused to tuck his tail between his legs and accept his company is cannon-fodder for the Americans or Europeans. He has struck out on his own in a bold move that most of the European, and in particularly British, brewers have been too scared, and too hamstrung by investors, to do.

Not surprisingly the shareholders don't appreciate paying for it but they will eventually see the fruits. This deal is good for Foster's.

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