Southcorp's board of directors today made another attempt to halt the takeover efforts of fellow Australian Foster's Group, calling the deal a "lousy" one for its shareholders.

In a letter published on its website, Southcorp said its board of directors were unanimously urging shareholders to reject Foster's A$4.17 per share takeover offer, describing the bid as "inadequate and opportunistic".

"If Foster's bid succeeds at A$4.17, Foster's will get the upside that's on the way - not Southcorp shareholders. Make no mistake - as it currently stands we see this as a great deal for Foster's, but a lousy deal for Southcorp shareholders," said CEO John Ballard.

"Now is not the time for Southcorp shareholders to sell their shares."

The company told shareholders they should ignore the Foster's offer and take no action in relation to their shares.

"The message to our shareholders is clear - it's not time to sell your shares," Ballard, said.

"Southcorp's management team is delivering, the global wine cycle is turning and our financial performance is demonstrating tangible improvement. Southcorp's board believes that it is not in the interest of Southcorp shareholders to accept this offer and allow Foster's to benefit from this upside at their expense.

"Southcorp is one of the world's great wine companies, possessing three of the most recognised Australian wine brands," Ballard said. "We would be a jewel in anyone's crown.
 
"Foster's bid is a great deal for Foster's but fails to recognise the strategic value of Southcorp, nor does it acknowledge the synergistic value Foster's would extract from Southcorp were it successful."

Southcorp said it had identified estimated cost savings of A$160m per annum that could be achieved by Foster's were it to succeed in its bid for Southcorp. This is equivalent to A$2.13 per Southcorp share.
 
"There is significant value - $2.13 per share - in the cost savings of combining Southcorp with Foster's, but Foster's offer does not adequately compensate Southcorp shareholders for this value. This shows why Foster's refuses to reveal their synergy targets," Ballard said.

Southcorp's analysis, Ballard said, had come to the conclusion that, upon owning 100% of Southcorp, Foster's would be able to close its Rothbury Estate winery in the Hunter Valley in NSW; close its Jamieson's Run winery in the Coonawarra region of South Australia; rationalise packaging facilities in the Barossa Valley and cancel the expansion of packaging facilities at the Wolf Blass winery .

Southcorp also believes Foster's would be able to relocate its sparkling wine production to Southcorp's Karadoc winery and rationalise viticulture and grower relations functions.

Furthermore, Southcorp said Foster's would be able to consolidate international distribution activities at Nuriootpa and Outer Harbour in South Australia, leading to higher export volumes through these sites and lower freight and container handling costs. It would also rationalise sales operations and regional head offices

Southcorp last week reported a 58% increase in pre-tax profit of A$78m for the first half of 2005, and EBITA of A$96.3m, which allowed it to recommence dividend payments ahead of schedule. The company said it is forecasting EBITA of A$238m for 2006 and a dividend of 11 cents per share, fully franked.

"The market dynamics in the wine industry are changing. We are emerging from the bottom of the cycle after a period of oversupply. This will be good for Southcorp's bottom line. Foster's acknowledges this improvement for the global wine industry in its rhetoric, but not in its offer price for Southcorp shareholders," Ballard said.