AUS: Analysts cautious on Modelo, Molson Coors bid for Foster's Group
Grupo Modelo and Molson Coors form unlikely duo in battle for Foster's Group
Foster's share price rose by 3.5% today (3 June) after Bloomberg cited an unnamed source as saying that Molson Coors and Grupo Modelo have been working on a joint bid for the business. Foster's has a market value of around AUD8.6bn (US$9.1bn).
Since Foster's spun-off its wine business, Treasury Wine Estates, into a separately-listed company last month, speculation has increased about a possible takeover offer for the group, which includes the core Australian beer business, Carlton & United Breweries.
Molson Coors has previously stated its interest in Foster's, but its potential combination with Mexico's leading brewer, Grupo Modelo, surprised many analysts. Several of them reacted with caution to the news.
"Foster's Group would provide a strong fit with Molson Coors' strengths and strategy," said Morningstar analyst Phil Gorham. "But, we think the structural complexity of the partnership with Modelo is likely to scupper a deal."
He added: "The emergence of Modelo on the ticket is a surprise to us because it is 50% owned by Anheuser-Busch InBev. We think it highly unlikely that A-B InBev will give its consent, because an acquisition of Foster's by Modelo could weaken the voting rights of the A-B InBev representatives on [Modelo's] board of directors.
"If A-B InBev's management views the deal as attractive, the firm has the financial clout to acquire Foster's Group outright."
MF Global analyst Andy Smith followed a similar line. "The news story of a joint bid by Molson Coors & Modelo for Fosters seems credible, albeit we think A-B InBev may move to block it," he said in a note.
Both analysts reiterated that they continue to see SABMiller as the more likely bidder for Foster's. "We would not be surprised if Asahi and SAB Miller were also in the frame to acquire this mature-market brewer," said Smith.
Gorham said that Modelo's arrival on the scene, and news of continuing interest from Molson Coors, "seems certain to solicit other offers". Interest from larger players, he said, would likely expose Molson Coors' lack of firepower.
Foster's said today: "The company notes this morning's media speculation in relation to a potential bid." In response to a request from the Australian Stock Exchange, it said that it is "not aware of any other information that may explain today's price change". It did not comment on whether it has received direct interest from potential suitors.
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