Molson Coors’ interest in acquiring the beer operations of Foster’s Group appears to have weakened after the Canadian brewer said it would relinquish its stake in the Australian firm.
Molson Coors built up a stake of more than 5% in Foster’s Group via a cash-settled, total return swap in 2008, but the brewer said today that it was in the process of relinquishing the stake. Back in September, just-drinks reported that Deutsche Bank, which bought the shares for Molson Coors, had “ceased to be a substantial holder” in Foster’s. At the time, Molson Coors declined to comment on the news.
The brewer has already settled some of the swap and plans to completely dispose of its shareholding in Foster’s by the first quarter of 2011, Molson Coors’ CEO, Peter Swinburn, confirmed today (3 November). The move suggests that Molson Coors has lost interest in Foster’s as a potential takeover target.
The Canadian brewer has previously declared its interest in Foster’s’ Australian beer arm, Carlton & United Breweries (CUB). Foster’s is set to demerge CUB from its wine business in the first half of 2011 and anlaysts strong expect a free-standing CUB to attract bids.
“We decided that we no longer wanted the exposure to the swap,” Swinburn told analysts during Molson Coors’ third quarter results conference call. He said that settling the swap would generate more cash for shareholders.
However, he denied that the brewer has lost interest in the Australian market. “We’ll continue to look at it,” he said, adding: “If there were any opportunities we wanted to take advantage of there, we’d act accordingly.”
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By GlobalDataWeak demand for beer in Molson Coors’ key US and UK markets during the third quarter of 2010 today underlined why Molson Coors might seek to enter a new market. CUB has leaked market share in Australia over the last five years, but it remains the number one player with a volume share of around 50%.
Other potential bidders for Foster’s Group’s CUB include Molson Coors’ joint venture partner in the US, SABMiller, and Japanese brewers Asahi and Suntory. Some analysts have suggested that Molson Coors would struggle to match its rivals’ financial firepower in a bidding war for CUB.
At the same time, the strong rise of the Australian dollar, to near parity with the US$, has raised the potential cost of a CUB takeover for companies based in the US and Canada. Economic experts do not expect the AUD to fall back significantly in the near-term.
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