Comment - Foster's Group Content to Go it Alone?

It is just over a month since SABMiller pounced on Foster's Group, and the brewers remain at a total stand-off. It's hard to see a way forward at the moment.

Last week, Foster's relaunched its core beer business, subtly renaming it Carlton United Brewers and declaring an intention to expand overseas. Shareholders and hacks looking for a shift in the group's stance on SABMiller - no matter how subtle - were disappointed, however.

SABMiller's AUD9.5bn (US$10.5bn) cash offer, or AUD11.2bn including debt, has been on the table since the tail-end of June, but no one is talking. Instead, both companies are watching to see who will blink first. Talk to SABMiller and you can't help feeling that the brewer is happy to let Foster's stew. But, Foster's is adamant that it is the Peroni Nastro Azzurro brewer with all the work to do.

"We're not saying that we would never engage," Foster's Group CEO, John Pollaers, is reported to have told one shareholder at a lunch on Friday (29 July). Is his resolve weakening, as the heading to this Australian newspaper article suggested? 

That idea seems more hopeful than likely. Pollaers swerved the crux of the matter - at what point would Foster's engage, and there's really no motive for him to make that public in any case. Foster's' share price has dipped during the month-long impasse, but remains stubbornly high, at AUD5.08 today (1 August), in relation to SABMiller's AUD4.9 per share cash offer.

It's still hard to see a way out, short of SABMiller upping its offer price. One assumes that this is a possibility, if only because it is probable that SAB anticipated this situation and it seems unlikely that the group started the process with its highest offer.

But, does Foster's think too highly of itself? "Why wouldn't you be interested in this business?" asked Pollaers last week. Well, presumably he has read most analysts' notes on the business.

There are reasons to be interested in Foster's, sure. It generates a lot of cash and is one of the most profitable brewers in the world. For the right buyer, it could be more profitable still. But, Australia is a cul-de-sac. Foster's has no overseas presence and is king of a market that has seen beer consumption decline continually for 30 years.   

Just what would the Foster's board be prepared to accept? Last week provided the first signs that shareholders are getting frustrated. Perhaps the more appropriate question, then, is how long will Foster's' shareholders allow it to continue in this manner?