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Foster's beer division could head towards SABMiller

THE London-listed brewer SABMiller is an early front runner to make a pre-emptive grab for control of Foster's valuable $9.7 billion beer division and its popular collection of top-ranked brands.

SABMiller, the world's third-largest brewer, brews Peroni and Grolsch and through its Pacific Beverages joint venture with Coca-Cola Amatil sells those brands as well as Miller and Bluetongue in Australia.

The company is likely to press its claim on a solo basis after a leading executive at its Australian brewing partner CCA said there was no interest in Foster's, with the focus instead on its beer portfolio.

According to a report in London's Daily Telegraph, SABMiller, which already owns Fosters' brewing rights in the US, is considering a $A12 billion bid for Foster's. The company declined to comment.

However, SABMiller could face competition for Foster's assets from Japanese giant Asahi Breweries and North American brewer Molson Coors, which already owns a 5 per cent stake in Foster's.

Last week Foster's surprised the market with news it would seek a demerger of the wine and beer businesses after 14 years of pursuing a mixed beverages strategy that has cost shareholders billions in dollars in lost earnings and write-downs.

The demerger announcement on Wednesday was accompanied with another write-down of Foster's wine business - the third in two years - with $1.1 billion to $1.3 billion of non-cash impairment charges to be booked this financial year.

This came as Foster's moved late last week to restructure its US wine business to cope better with the downturn in the US economy and the international wine glut.

The first phase has included a distribution overhaul, and Foster's has signed new distribution contracts with Glazer's Distributors to sell its wines in Texas, Louisiana and Oklahoma. Foster's has also signed a similar distribution deal with Alliance Beverage Distributing, a partnership between Glazer's and Charmer Sunbelt Group, to sell its wines in Arizona.

Charmer was awarded long-term contracts for New York, Maryland and Washington DC last week. The deals cover its US wines, such as Beringer and Chateau St. Jean as well as Australian brands Penfolds, Rosemount and Wolf Blass.

By Eli Greenblat

Based on the following sources:
http://www.smh.com.au