brokers promoting fgl means time to sell

The following from "The Age" website.

(I think if analysts are suggesting that Fosters is a takeover target or a possible split, this suggestion should be interpreted as follows: " we have realised it will be a dog for at least another 3 years, big investors want out, help us out by buying some...." )


More fizz in Foster's if it splits


* June 11, 2008 - 4:44PM
*

Foster's Group, Australia's top alcoholic drinks group, could boost the combined value of its beer and wine businesses by more than 20% if it splits them into two, analysts say.

Foster's, the world's second-largest wine firm, cut its 2008 profit forecast on Tuesday and announced a review of its wine operation, which makes up about 35% of total revenues.

The business has faced sluggish sales due to slowing demand in the US, a drought in Australia and a strong Australian dollar which makes Aussie wine more expensive overseas, and analysts have long said it is a drag on the company's more successful beer business.

Spinning off the beer business, for which UBS analysts gave a enterprise value of up to $11.3 billion, could attract global brewers, but other analysts warned that finding a bidder for wine would be a bigger challenge.

"Foster's best option is to consider demerging into two separate businesses, beer and wine, so that investors can decide which they prefer to invest in,'' UBS said, adding that the wine business could have an enterprise value of up to $4.2 billion.

Six analysts' break-up valuations ranged between $5.80 and $6.86 a share, which at the top end was 26% above Foster's close of $5.45 on Tuesday. Its shares gained 2% today to close at $5.56.

JP Morgan analysts said the resignation of Foster's chief executive, Trevor O'Hoy, also announced on Tuesday, increased the likelihood of a break-up, which could attract top global brewers such as SAB Miller or Heineken.

"While these companies have been more interested in other opportunities to date as a result of the risk in having to divest Foster's wine operations, a demerger by Foster's would remove this issue, and start a competitive bidding process,'' wrote JP Morgan's Stuart Jackson.

However, Macquarie Research said a quick break-up appeared unlikely, with the review of the wine business appearing to focus on operational rather than ownership issues. It said that finding a buyer for the business would be a big challenge because of a difficult environment and the unit's poor performance.

Merrill Lynch analyst David Errington said his fundamentally negative view on Foster's prospects had not changed, adding a break-up or takeover would be risky given the state of Foster's wine business and the wider industry.

Mr Errington said Foster's had put itself in play and at a stretch a break-up could value the group at $8.55 a share with the beer business worth $13 billion, based on recent multiples paid in beer takeovers.