GLOBAL: SABMiller may give Foster's cold shoulder - analyst

SABMiller may have turned its back on a bid for Foster's Group's newly-demerged Australian beer business, with other potential bidders also melting away, according to analyst group Sanford Bernstein.

SABMiller is one of several brewers thought to have taken a look at the Foster's beer unit, Carlton & United Breweries (CUB). The business is more attractive now that Foster's has spun off its troubled wine division, Treasury Wine Estates.

Meanwhile, Foster's' own independent adviser has said that takeover offers are likely for both the standalone beer and wine arms.

Yet, speculation appears to have hit a rut. Today (20 May), Sanford Bernstein outlined why it believes SABMiller could steer clear of Foster's.

"Australia is inherently a low growth beer market," it said. "Furthermore, Foster's has been losing market share in recent years, as it is under-represented in the fast growing premium craft and import segments."

Foster's remains the number one brewer in Australia, with around a 50% volume share, but Bernstein said that the country's volume outlook "looks distinctly drab".

Notwithstanding the potential benefits of CUB's strong EBIT margin, which stands at around 38%, Bernstein said that SABMiller would likely have to pay a high price to acquire CUB, possibly up to AUD12.2bn (US$13.2bn). For a brewer that is performing well and is strongly-focused on emerging market growth, an expensive deal in a mature beer market may not sit so well.

Yesterday, on a media call following SABMiller's full-year results, group CEO Graham Mackay declined to comment on the brewer's interest in several potential targets, including Foster's, Brazil's Schincariol and Castel's Africa beer business.

With SABMiller's interest in Foster's' CUB unit having possibly cooled, there looks to be no clear frontrunner for the division.

According to Bernstein, Japan's Asahi might run into competition difficulties. Molson Coors, meanwhile, appeared to end its interest in Foster's after selling a 5% stake in the group at the end of 2010.

"Anheuser-Busch InBev would appear to us to be a possible dark horse in the longer term," said Bernstein. "However, Foster's has no international angle such as the potential revenue synergies from the Budweiser brand, fewer direct synergies, and is already much more profitable than old [A-B], with likely lower upside to cost-cutting."

Since the Foster's demerger took effect on 10 May, a number of analysts have pointed to hurdles to a takeover of CUB and wine business Treasury Wine Estates.