Blog: Chris Brook-CarterLet the games begin...

Chris Brook-Carter | 17 January 2005

Following its acquisition of an 18.8% stake in Southcorp from the Oatley family last week, wine and brewing giant Foster’s yesterday unveiled a full takeover bid for the company on the same terms it offered the Oatleys - A$4.17 per share in cash, valuing the winemaker at A$3.1bn.

Many believed that the endorsement of the Oatley family, Southcorp’s largest shareholder group, would be enough to ensure the success of a Foster’s takeover bid for the wine giant.

But with a statement from the Southcorp board later in the day declaring the Foster’s bid “inadequate and opportunistic” it appears we are in for a fascinating battle of brinkmanship between hunter and prey.

Bob Oatley said today: “I believe the price received for our stake is very attractive.”

But Southcorp’s board responded by noting that, “in acquiring its 18.8% stake, Foster’s has agreed to an ‘escalator’ arrangement, which enables the Oatley family to participate in any higher offer. The board believes that Foster’s offer of $4.17 per share may just be its ‘opening bid’.”

The proposed offer price of A$4.17 per share represents a discount of 1.9% to the closing price of Southcorp shares last Wednesday (12 January) and a premium of only 3.7% to the volume-weighted average trading price of Southcorp shares in the month prior to 13 January.

Southcorp’s chairman, Brian Finn said: “The board has informed Foster’s that it is not prepared to recommend the offer as it does not adequately reflect the strategic value of the company.

“Southcorp has the best wine brand portfolio in the Australian market with icon brands including Penfolds, Rosemount, Lindemans and Wynns and an irreplaceable vineyard portfolio of over 8000 hectares, with strategic holdings in virtually all of Australia’s premium wine growing regions.”

In defence of Southcorp’s waiting game, investors and shareholders seem so far to agree, pushing the winemaker’s share price on Monday up by 36¢ to A$4.61 at the end of trading after peaking at A$4.76.

The move by Southcorp also opens the door slightly further to a possible rival bid from the likes of Allied Domecq, Diageo, Pernod Ricard or Constellation. Foster’s 18.8% stake gives it the edge, but if it refuses to increase its bid and call Southcorp’s bluff, a third party could easily enter the fray.


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