Foster's Shares Surge on InBev, SABMiller Bid Report (Update4)
By Robert Fenner
Aug. 29 (Bloomberg) -- Shares of Foster's Group Ltd., Australia's biggest beer and wine maker, rose the most in 16 years after the Sydney Morning Herald reported InBev NV and SABMiller Plc may be considering takeover bids.
The rally increased the market value of Foster's to A$12 billion ($9 billion), the highest since May. Chief Executive Officer Trevor O'Hoy, who today reported higher-than-expected earnings for the Melbourne-based brewer, declined to confirm or deny the report.
Buying Foster's would give the companies 55 percent of the Australian beer market through brands such as Victoria Bitter and Crown Lager. Foster's is also the world's second-biggest winemaker, with vineyards in California, Australia and France producing Beringer, Lindemans and Penfolds.
``There is a scrambling for stock after the report,'' said Paul Trainor, who manages the equivalent of $150 million at Direct Portfolio Services Ltd. in Sydney, including Foster's shares. ``Nobody wants to be caught short if there is a bid.''
Foster's shares rose 50 cents, or 9.2 percent, to A$5.95 at 3:10 p.m. in Sydney, erasing all of this year's decline.
A takeover would probably result in the sale of Foster's wine division, whose earnings have suffered from a glut of grapes, the newspaper reported, without saying where it got this information.
The wine unit ranks behind only Fairport, New York-based Constellation Brands Inc., by revenue.
`Strategic Value'
``People are prepared to pay big money for companies that have strategic value,'' O'Hoy said on a conference call. ``We are the No.1 premium wine company in the world today. We have an unassailable position in multi-beverage Australia.''
The A$5.8 billion of wine acquisitions Foster's made since 2000 has held back its shares, which have posted one annual increase since 2001. Wine represents about 55 percent of sales, compared to less than 10 percent at rival Lion Nathan Ltd.
Before today, Foster's shares had gained 24 since agreeing to buy Beringer Wine Estates Holdings Inc. in 2000. Shares of Lion Nathan Ltd., Australia's second-ranked brewer, more than doubled in the same time.
Nick Maher, a Melbourne-based spokesman for Gavin Anderson, which handles SABMiller's communications in Australia, declined to confirm or deny the report. Nigel Fairbrass, a London-based spokesman for SABMiller, and Marianne Amssoms, spokeswoman for Leuven, Belgium-based InBev, didn't return voicemail messages left outside of office hours.
Global Takeovers
Global takeovers of breweries, winemakers and liquor producers rose 57 percent last year to $40.4 billion, according to data compiled by Bloomberg.
Foster's acquisition of Southcorp Ltd. last year was the fourth largest, trailing Pernod-Ricard SA's purchase of Allied Domecq Plc.
Foster's has sold A$1 billion of overseas breweries and brands this year to focus on its more profitable domestic beer and international wine units.
O'Hoy sold the Foster's brand in Europe and Russia to Scottish & Newcastle Plc in May for 309 million pounds ($583 million). Since June, Foster's has agreed to sell its Chinese brewing assets to Suntory Ltd. and the Vietnam business to Asia Pacific Breweries Ltd. SABMiller is buying its Indian beer unit.
Earlier today, Foster's reported earnings rose 22 percent in the second-half on gains at its beer unit and the acquisition of Southcorp, which gave it brands including Rosemount and Penfolds.
`Very Good Result'
Operating earnings rose to A$289.8 million in the six months ended June 30 from A$238.3 million a year earlier. The profit was calculated by subtracting first-half profit before items from Foster's annual result of A$623.1 million.
The second-half result beat the A$277.1 million average estimate of nine analysts surveyed by Thomson Financial.
``They've had a very good result, we quite like the businesses they've assembled and what they are doing,'' said Ross Barker, who helps manage the equivalent of $3.3 billion at Australian Foundation Investment Co. in Melbourne, including Foster's stock. ``They are still bedding down the Southcorp acquisition and getting that wine business humming.''
Including one-time items such as gains from selling the Foster's brand in Europe, net income for the half rose six-fold to A$875 million.
O'Hoy expects earnings growth in the current year to accelerate with wider profit margins as the benefits of a beer production efficiency program and integration of Southcorp rise.
Grape Crops
He is increasing profitability at his beer unit and revamping the Rosemount brand, whose sales fell 23 percent in the past year, to limit the impact of record Californian and Australian grape crops on wine prices. O'Hoy is also selling his wine clubs.
``They have done a lot of the hard work to get their wine business back on track,'' Direct Portfolio's Trainor said. ``They are finally doing something with the Rosemount brand, and they clearly don't think that it is broken''
O'Hoy plans to buy back about 1.8 percent of Foster's shares after cutting net debt 17 percent to A$3.5 billion during the year. The A$200 million buyback will be done on the market.
The domestic beer unit increased second-half earnings before interest and tax 16 percent to A$298.1 million after raising prices and selling more expensive and profitable beer labels.
O'Hoy is targeting A$100 million of cost cuts from beer by eliminating jobs and focusing on the company's most efficient breweries. Beer sales for the second half rose 6 percent to A$933.9 million.
The beer unit's profit margin, which measure earnings as a percentage of sales, widened to 33.4 percent in the full-year from 30.4 percent a year earlier.
O'Hoy, who gets about 60 percent of earnings from brewing, is integrating his wine, beer and spirit sales forces into a single team, selling all the company's labels.
He achieved A$61 million savings from integrating Southcorp during the year, beating his A$50 million target. Annual savings from buying Southcorp are forecast to rise to A$165 million by 2008. (Update4)
By Robert Fenner
Aug. 29 (Bloomberg) -- Shares of Foster's Group Ltd., Australia's biggest beer and wine maker, rose the most in 16 years after the Sydney Morning Herald reported InBev NV and SABMiller Plc may be considering takeover bids.
The rally increased the market value of Foster's to A$12 billion ($9 billion), the highest since May. Chief Executive Officer Trevor O'Hoy, who today reported higher-than-expected earnings for the Melbourne-based brewer, declined to confirm or deny the report.
Buying Foster's would give the companies 55 percent of the Australian beer market through brands such as Victoria Bitter and Crown Lager. Foster's is also the world's second-biggest winemaker, with vineyards in California, Australia and France producing Beringer, Lindemans and Penfolds.
``There is a scrambling for stock after the report,'' said Paul Trainor, who manages the equivalent of $150 million at Direct Portfolio Services Ltd. in Sydney, including Foster's shares. ``Nobody wants to be caught short if there is a bid.''
Foster's shares rose 50 cents, or 9.2 percent, to A$5.95 at 3:10 p.m. in Sydney, erasing all of this year's decline.
A takeover would probably result in the sale of Foster's wine division, whose earnings have suffered from a glut of grapes, the newspaper reported, without saying where it got this information.
The wine unit ranks behind only Fairport, New York-based Constellation Brands Inc., by revenue.
`Strategic Value'
``People are prepared to pay big money for companies that have strategic value,'' O'Hoy said on a conference call. ``We are the No.1 premium wine company in the world today. We have an unassailable position in multi-beverage Australia.''
The A$5.8 billion of wine acquisitions Foster's made since 2000 has held back its shares, which have posted one annual increase since 2001. Wine represents about 55 percent of sales, compared to less than 10 percent at rival Lion Nathan Ltd.
Before today, Foster's shares had gained 24 since agreeing to buy Beringer Wine Estates Holdings Inc. in 2000. Shares of Lion Nathan Ltd., Australia's second-ranked brewer, more than doubled in the same time.
Nick Maher, a Melbourne-based spokesman for Gavin Anderson, which handles SABMiller's communications in Australia, declined to confirm or deny the report. Nigel Fairbrass, a London-based spokesman for SABMiller, and Marianne Amssoms, spokeswoman for Leuven, Belgium-based InBev, didn't return voicemail messages left outside of office hours.
Global Takeovers
Global takeovers of breweries, winemakers and liquor producers rose 57 percent last year to $40.4 billion, according to data compiled by Bloomberg.
Foster's acquisition of Southcorp Ltd. last year was the fourth largest, trailing Pernod-Ricard SA's purchase of Allied Domecq Plc.
Foster's has sold A$1 billion of overseas breweries and brands this year to focus on its more profitable domestic beer and international wine units.
O'Hoy sold the Foster's brand in Europe and Russia to Scottish & Newcastle Plc in May for 309 million pounds ($583 million). Since June, Foster's has agreed to sell its Chinese brewing assets to Suntory Ltd. and the Vietnam business to Asia Pacific Breweries Ltd. SABMiller is buying its Indian beer unit.
Earlier today, Foster's reported earnings rose 22 percent in the second-half on gains at its beer unit and the acquisition of Southcorp, which gave it brands including Rosemount and Penfolds.
`Very Good Result'
Operating earnings rose to A$289.8 million in the six months ended June 30 from A$238.3 million a year earlier. The profit was calculated by subtracting first-half profit before items from Foster's annual result of A$623.1 million.
The second-half result beat the A$277.1 million average estimate of nine analysts surveyed by Thomson Financial.
``They've had a very good result, we quite like the businesses they've assembled and what they are doing,'' said Ross Barker, who helps manage the equivalent of $3.3 billion at Australian Foundation Investment Co. in Melbourne, including Foster's stock. ``They are still bedding down the Southcorp acquisition and getting that wine business humming.''
Including one-time items such as gains from selling the Foster's brand in Europe, net income for the half rose six-fold to A$875 million.
O'Hoy expects earnings growth in the current year to accelerate with wider profit margins as the benefits of a beer production efficiency program and integration of Southcorp rise.
Grape Crops
He is increasing profitability at his beer unit and revamping the Rosemount brand, whose sales fell 23 percent in the past year, to limit the impact of record Californian and Australian grape crops on wine prices. O'Hoy is also selling his wine clubs.
``They have done a lot of the hard work to get their wine business back on track,'' Direct Portfolio's Trainor said. ``They are finally doing something with the Rosemount brand, and they clearly don't think that it is broken''
O'Hoy plans to buy back about 1.8 percent of Foster's shares after cutting net debt 17 percent to A$3.5 billion during the year. The A$200 million buyback will be done on the market.
The domestic beer unit increased second-half earnings before interest and tax 16 percent to A$298.1 million after raising prices and selling more expensive and profitable beer labels.
O'Hoy is targeting A$100 million of cost cuts from beer by eliminating jobs and focusing on the company's most efficient breweries. Beer sales for the second half rose 6 percent to A$933.9 million.
The beer unit's profit margin, which measure earnings as a percentage of sales, widened to 33.4 percent in the full-year from 30.4 percent a year earlier.
O'Hoy, who gets about 60 percent of earnings from brewing, is integrating his wine, beer and spirit sales forces into a single team, selling all the company's labels.
He achieved A$61 million savings from integrating Southcorp during the year, beating his A$50 million target. Annual savings from buying Southcorp are forecast to rise to A$165 million by 2008. (Update4)
By Robert Fenner
Aug. 29 (Bloomberg) -- Shares of Foster's Group Ltd., Australia's biggest beer and wine maker, rose the most in 16 years after the Sydney Morning Herald reported InBev NV and SABMiller Plc may be considering takeover bids.
The rally increased the market value of Foster's to A$12 billion ($9 billion), the highest since May. Chief Executive Officer Trevor O'Hoy, who today reported higher-than-expected earnings for the Melbourne-based brewer, declined to confirm or deny the report.
Buying Foster's would give the companies 55 percent of the Australian beer market through brands such as Victoria Bitter and Crown Lager. Foster's is also the world's second-biggest winemaker, with vineyards in California, Australia and France producing Beringer, Lindemans and Penfolds.
``There is a scrambling for stock after the report,'' said Paul Trainor, who manages the equivalent of $150 million at Direct Portfolio Services Ltd. in Sydney, including Foster's shares. ``Nobody wants to be caught short if there is a bid.''
Foster's shares rose 50 cents, or 9.2 percent, to A$5.95 at 3:10 p.m. in Sydney, erasing all of this year's decline.
A takeover would probably result in the sale of Foster's wine division, whose earnings have suffered from a glut of grapes, the newspaper reported, without saying where it got this information.
The wine unit ranks behind only Fairport, New York-based Constellation Brands Inc., by revenue.
`Strategic Value'
``People are prepared to pay big money for companies that have strategic value,'' O'Hoy said on a conference call. ``We are the No.1 premium wine company in the world today. We have an unassailable position in multi-beverage Australia.''
The A$5.8 billion of wine acquisitions Foster's made since 2000 has held back its shares, which have posted one annual increase since 2001. Wine represents about 55 percent of sales, compared to less than 10 percent at rival Lion Nathan Ltd.
Before today, Foster's shares had gained 24 since agreeing to buy Beringer Wine Estates Holdings Inc. in 2000. Shares of Lion Nathan Ltd., Australia's second-ranked brewer, more than doubled in the same time.
Nick Maher, a Melbourne-based spokesman for Gavin Anderson, which handles SABMiller's communications in Australia, declined to confirm or deny the report. Nigel Fairbrass, a London-based spokesman for SABMiller, and Marianne Amssoms, spokeswoman for Leuven, Belgium-based InBev, didn't return voicemail messages left outside of office hours.
Global Takeovers
Global takeovers of breweries, winemakers and liquor producers rose 57 percent last year to $40.4 billion, according to data compiled by Bloomberg.
Foster's acquisition of Southcorp Ltd. last year was the fourth largest, trailing Pernod-Ricard SA's purchase of Allied Domecq Plc.
Foster's has sold A$1 billion of overseas breweries and brands this year to focus on its more profitable domestic beer and international wine units.
O'Hoy sold the Foster's brand in Europe and Russia to Scottish & Newcastle Plc in May for 309 million pounds ($583 million). Since June, Foster's has agreed to sell its Chinese brewing assets to Suntory Ltd. and the Vietnam business to Asia Pacific Breweries Ltd. SABMiller is buying its Indian beer unit.
Earlier today, Foster's reported earnings rose 22 percent in the second-half on gains at its beer unit and the acquisition of Southcorp, which gave it brands including Rosemount and Penfolds.
`Very Good Result'
Operating earnings rose to A$289.8 million in the six months ended June 30 from A$238.3 million a year earlier. The profit was calculated by subtracting first-half profit before items from Foster's annual result of A$623.1 million.
The second-half result beat the A$277.1 million average estimate of nine analysts surveyed by Thomson Financial.
``They've had a very good result, we quite like the businesses they've assembled and what they are doing,'' said Ross Barker, who helps manage the equivalent of $3.3 billion at Australian Foundation Investment Co. in Melbourne, including Foster's stock. ``They are still bedding down the Southcorp acquisition and getting that wine business humming.''
Including one-time items such as gains from selling the Foster's brand in Europe, net income for the half rose six-fold to A$875 million.
O'Hoy expects earnings growth in the current year to accelerate with wider profit margins as the benefits of a beer production efficiency program and integration of Southcorp rise.
Grape Crops
He is increasing profitability at his beer unit and revamping the Rosemount brand, whose sales fell 23 percent in the past year, to limit the impact of record Californian and Australian grape crops on wine prices. O'Hoy is also selling his wine clubs.
``They have done a lot of the hard work to get their wine business back on track,'' Direct Portfolio's Trainor said. ``They are finally doing something with the Rosemount brand, and they clearly don't think that it is broken''
O'Hoy plans to buy back about 1.8 percent of Foster's shares after cutting net debt 17 percent to A$3.5 billion during the year. The A$200 million buyback will be done on the market.
The domestic beer unit increased second-half earnings before interest and tax 16 percent to A$298.1 million after raising prices and selling more expensive and profitable beer labels.
O'Hoy is targeting A$100 million of cost cuts from beer by eliminating jobs and focusing on the company's most efficient breweries. Beer sales for the second half rose 6 percent to A$933.9 million.
The beer unit's profit margin, which measure earnings as a percentage of sales, widened to 33.4 percent in the full-year from 30.4 percent a year earlier.
O'Hoy, who gets about 60 percent of earnings from brewing, is integrating his wine, beer and spirit sales forces into a single team, selling all the company's labels.
He achieved A$61 million savings from integrating Southcorp during the year, beating his A$50 million target. Annual savings from buying Southcorp are forecast to rise to A$165 million by 2008.
FGL Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
(20min delay)
