Comment - Foster's Group and SABMiller - They Blinded Us With Science
The arrival of an agreement between Foster's Group and SABMiller over the latter's bid for the former earlier today has come about – in part – following an improved bid by SAB, as one would expect. How much that improvement equates to, however, is open to confusion and Foster's appears all too keen to keep those waters murky.
An offer to Foster's shareholders of AUD5.5325 per share has been recommended by Foster's board today. That's an improvement of 13% on SABMiller's original offer of AUD4.90 back in June – a point that Foster's, naturally, has been only too keen to make today.
SABMiller told a different story in its own announcement. Mindful of a shareholder base that is lukewarm to the idea of the Peroni brewer diluting its exposure to emerging markets, SABMiller said that it is paying AUD5.1 per share for Foster's, or a straight AUD9.9bn.
The difference is mainly accounted for by debt, dividends and a capital reduction scheme agreement. Foster's has already said it will pay a dividend of AUD0.1325 per share, so that takes the offer price down to AUD5.4 from AUD5.5323.
Then, Foster's has also agreed to pay out AUD0.3 per share in a capital reduction scheme, to be completed prior to the deal closing. This yields the AUD5.1 figure quoted by SABMiller.
This is neat footwork, on both sides. As John Pollaers, Foster's CEO, pointed out in a conference call earlier: “The only way I can think about [the offer] is how the man on the street is going to think this through. Compared to the AUD4.90 I'd have in my hand – with very significant conditions attached – now I will have AUD5.5325 in my hand.”
Back in the UK, I'll wager that SABMiller still has some explaining to do to its shareholders about how, exactly, it's going to deliver adequate returns on this deal.
That said, it could have been a lot worse. SABMiller has played a canny game, helped by the lack of rival bidders and stock market uncertainty. More than likely, it has secured Foster's at about what it expected, or possibly slightly less.
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