SABMiller agrees deal to buy Foster's at A$5.10/share

Rebecca Prescott21 Sep 2011

SABMiller has agreed with Foster's Group a recommended cash offer to Foster's shareholders at A$5.10 per share, which values Foster's equity at approximately A$9.9bn.

As part of the transaction, and in line with Foster's previously announced capital management initiative, Foster's will pay its shareholders a return of capital of $0.30 per share prior to closing, reflecting both the confirmed value of historic tax losses and a better cash/net debt position than assumed in SABMiller's initial proposal.

The agreed proposal represents an acquisition enterprise value of $11.5bn, which is a 2.8% increase on the enterprise value of $11.2 bn implied by SABMiller's initial proposal announced on 21 June.

The acquisition of Foster's is consistent with SABMiller's strategic priorities and will provide SABMiller with:

  • Exposure to Australia's strong economic growth prospects
  • A leading position in the stable and profitable Australian beer industry
  • The opportunity to apply SABMiller's capabilities and scale to improve Foster's financial and operating performance.

The acquisition is expected to be EPS enhancing for SABMiller in the first full year of ownership and economic returns are expected to exceed the project WACC by year five.

SABMiller and Foster's have agreed that the offer will be effected by means of a scheme of arrangement to be proposed by Foster's to its shareholders.

SABMiller has separately reached agreement with Coca-Cola Amatil to be able to acquire its share of the Pacific Beverages joint venture should SABMiller acquire a controlling interest in Foster's.

SABMiller and Foster's have agreed to work together to prepare the necessary documents to be considered by Foster's shareholders. The scheme document is expected to be posted to Foster's shareholders in approximately six weeks. If approved by shareholders at the relevant scheme meetings later this year, SABMiller expects the acquisition to be completed before the end of 2011.

Commenting on the agreement, SABMiller's chief executive, Graham Mackay, said: "We are pleased that we have reached agreement on a recommended transaction to be put to Foster's shareholders. Foster's will become an important part of our business, and through the application of our commercial capabilities and global scale, we expect to build on the initiatives that Foster's management has put in place, further enhancing Foster's performance and creating value for our shareholders.

"Foster's has a long-standing and proud reputation as one of the leading companies in Australia. We look forward to working with Foster's employees and other stakeholders to ensure the success of Foster's in the future as the largest brewer in Australia with an outstanding portfolio of brands."

Source: SABMiller