Blog: Pinning a price on Foster's wine arm
Chris Mercer | 2 June 2010
Watching analysts attempt to put a price tag on Foster's wine business is a bit like watching a blindfolded drunkard play 'pin the tail on the donkey'.
And yes, I have seen one.
Foster's Group's decision to demerge is wine and beer businesses, announced last week, sparked initial speculation on a sell-off and then further chatter on the divisions' value.
A week later and the one thing we can conclude is that, for wine, no one is really sure what the value will be.
According to a report in the Australian newspaper yesterday (1 June), some analysts think that Foster's wine division is only worth AUD1.5bn, while others think the value is closer to AUD4bn.
A major sticking point is deciding on whether the wine business should be valued on earnings or on assets.
The other factor is that Foster's does not plan to demerge the businesses until the first half of calendar 2011, at the earliest.
The wine division's value could fluctuate depending on the progress of new distribution deals recently signed by Foster's in the key US market, and also on the group's progress in selling off non-core vineyards and brands.
There is also every chance that the wine business could be broken up in any takeover deal, with no single buyer willing to take on the whole portfolio.
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