The beverage analyst at Merrill Lynch has questioned the decision by Foster's to launch a takeover for fellow Australian Southcorp.

In a research note David Errington said the price Foster's was paying for Southcorp was "extremely high".

"We maintain our previously stated views that we don't believe Foster's buying Southcorp (particularly at this price) is in the best interests of Foster's shareholders - particularly over the coming two- to three-year period," Errington said.

"We do however acknowledge that Foster's is looking toward shareholder interests in the longer term (beyond five years) rather than medium term.

"Our concerns towards Foster's buying Southcorp (other than price paid) are underpinned by our view that the Australian wine market looks like it will deteriorate over the coming two- to three-year period, and that we believe there are material risks in integrating the Foster's and Southcorp wine businesses."