SABMiller eyeing new Fosters Group bid?

SABMiller eyeing new Foster's Group bid?

SABMiller is willing to slightly raise its bid for Foster's Group, but is waiting for price expectations to drop once the Australian brewer issues its full-year results, according to a report.

SABMiller would be willing to slightly increase its current AUD4.9 per share cash offer for Foster's, Reuters reported today (10 August), citing investment bankers with knowledge of the situation. However, the Peroni brewer is waiting for Foster's' results statement on 23 August, the report said.

The two companies have reached an impasse over the current bid, with neither willing to make the next move. Foster's has rejected SABMiller's AUD9.5bn offer - AUD11.2bn including debt - as too low, while, privately, SABMiller has let it be known that it is content to allow Foster's to "stew" for a while.

Last week, amid a general stock market slide around the world, Foster's saw its share price fall below SABMiller's bid price for the first time since the takeover offer became public, in late June. Foster's had hovered at AUD5 or above following news of the bid, but it sank back to AUD4.51 on Tuesday.

Subsequently, shares have rallied to AUD4.93, but some analysts believe the slip plays into SABMiller's hands by lowering the price expectations of Foster's shareholders. "I bet they are licking their lips at the opportunity the stock price is providing," Morningstar analyst Phil Gorham told just-drinks earlier this week. However, he added that the strengthening AUD against the US dollar would nullify some of the advantages. SABMiller reports in US$.

Foster's full-year results could be key. Last week, Nielsen data showed that Foster's beer market share in Australia fell from 49.1% at the end of March to 48.7% at the end of June, on a moving annual total basis.

So far, SABMiller remains the only bidder for Foster's and it may hope to pounce on a disappointing Foster's performance. That said, many analysts believe that the Peroni brewer is working on a tight margin of error. It may not be able to secure a satisfactory return on investment with a bid that is significantly higher than its current one.