Southcorp, Australia's second-biggest winemaker, has told its shareholders to reject the takeover bid from Foster's Group Ltd, saying the rival winemaker and brewer may raise its A$2.5bn (US$1.9bn) offer.

In a letter to shareholders published on the Australian Stock Exchange website, Southcorp said the offer did not reflect the full strategic value of Southcorp. "The acquisition of Southcorp's brands and portfolio assets would deliver significant synergies to Foster's and a range of other players globally and in fact would propel any one of the top five global wine companies into market leadership," the letter said.

The letter went on to say that the bid was opportunistic, and represented a 1.9% discount to the closing price of Southcorp shares on 13 January and a premium of only 3.7% to the volume weighted average trading price of Southcorp shares in the month prior to the offer.

"The offer is opportunistic," the letter said, "having been made at a time when Southcorp's earnings are depressed due to the current position the company is facing in the global wine cycle and the relatively high Australian dollar. We are also yet to see the full benefits of Veraison (the company's cost cutting programme) and the recent asset review."

Southcorp also said that it believed, Foster's bid may only be its opening bid. "Foster's would have you believe that, because the Oatley family have accepted their bid of A$4.17 per share, that this is a great deal for all Southcorp shareholders. However, you should be aware that the sale agreement between Foster's and the Oatley family allows for them to benefit from any increased bid price. Your board believes that this is evidence that Foster's offer of A$4.17 may just be its opening bid."