AUS: Foster's Group demerges business
Treasury Wine Estates splits from Foster's Group
Foster's Group's core beer business and its wine arm, Treasury Wine Estates, have begun life as separate companies.
Treasury Wine Estates (TWE) began trading on the Australian Stock Exchange today (10 May), albeit on a deferred settlement basis until 24 May. The move marks the final chapter of Foster's Group's year-long project to demerge the Rosemount and Penfolds wine producer from its Australian beer business, Carlton & United Breweries.
After the first day of trading, TWE's market value was around AUD2.1bn (US$2.3bn), while Foster's was valued at around AUD8.9bn.
The initial valuations will be of particular interest to potential suitors. Several analysts expect approaches for both businesses. In late March, it emerged that Grant Samuel, the independent advisor to Foster's on the demerger plan, believes that the demerger "should increase the likelihood of shareholders receiving a takeover offer for New Foster's and/or Treasury Wine Estates".
Prior to the demerger, and when questioned about a potential sale of one or both divisions, Foster's said repeatedly that it would consider all options to increase returns for shareholders.
SABMiller, Tsingtao Brewery and Japan's Asahi Breweries have all been linked with a possible move for Carlton & United Breweries, which accounts for one in every two beers sold in Australia. Last year, meanwhile, Foster's rejected a US$2.5bn bid for TWE from an unnamed private equity group, thought to have been Cerberus Capital.
TWE's chairman, Max Ould, said today: “As a standalone business, TWE will benefit from enhanced strategic and management focus and enjoy greater operational and decision-making flexibility."
Over the past three years, write-down charges have dogged the winemaker, but Ould said that he is confident in the firm's potential. "The performance of the business continues to improve, and this, together with low debt and strong cash flows, position the company well to grow value for shareholders in the future,” he said.
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. Ho...
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