MELBOURNE/LONDON (Reuters) ? Global brewer SABMiller has taken its $10 billion bid direct to Foster's Group shareholders, days before Foster's announces its annual results, having failed to win over the Australian company's board.
The cash offer at $A4.90 a Foster's share was similar to SABMiller's first approach back in June, though the London-based brewer said the offer would be reduced by any dividend paid by Foster's in the future, with analysts forecasting a 15 cent second half dividend to be announced next week.
Foster's third-largest shareholder saw SABMiller's move on Wednesday as a way to get the ball rolling on a deal after Foster's refused talks, and was not surprised SABMiller came back at A$4.90 since that was the price it initially proposed.
"As a shareholder, the move is welcome in that it'll get the parties engaged," said Matthew Williams, Australian equities manager at Perpetual Investments, which has a 4.7 percent stake in Foster's.
"The ball is in play," said Williams, who said his company has not been approached either by the Foster's board or SABMiller about its position.
Foster's shares closed up 0.6 percent at A$4.96 in Sydney on Wednesday, ahead of the A$4.90 bid price. SABMiller shares were down 0.6 percent at 21.05 pounds in London, where the FTSE 100 index was down 1.2 percent at 3:30 a.m. EDT.
SABMiller has unsuccessfully tried to engage with Foster's without any luck over the last two months, and its preferred route is still to go for a recommended bid, analysts said. Under Australian stock market rules, it now has two months to submit a formal bid.
Foster's immediately rejected SABMiller's offer in June, and Chief Executive John Pollaers said the offer was so low it was not worth discussing. He recently came under fire from some shareholders for failing to engage with SABMiller.
Foster's declined to comment further on Wednesday.
SABMiller has its financing in place and is ready to go ahead with its bid and not wait for Foster's annual results on August 23, which are expected to show a decline in beer profits, analysts added.
The cash deal values Foster's at A$9.5 billion ($10 billion) before debt, but taking debt into account the enterprise value of the bid is A$11.2 billion ($11.7 billion).
A deal would join together the brewer of Miller Lite, Peroni and Grolsch with the Melbourne-based maker of Victoria Bitter, Pure Blonde and Cascade beer, and would be the biggest brewing deal since InBev paid $52 billion to buy Anheuser-Busch to form AB InBev in the world's biggest cash takeover in 2008.
"As there has been no willingness to engage in relation to SABMiller's proposal on the part of the Foster's board, SABMiller has decided to make an offer to Foster's shareholders directly," SABMiller said in a statement.
Asked if he would accept the offer, Jason Beddow, managing director of Argo Investments, which has a 0.5 percent stake in Foster's, said; "At this stage no. There's still plenty to play out. I'm a bit surprised they went hostile before their results."
"This offer will be adjusted for any dividend paid, so you could argue it's actually a lower price than the earlier indicative A$4.90, which was never consummated as a deal because they threw it out there, the board said no, and that was it," Beddow added.
When SABMiller launched its bid for Foster's, analysts said the London-based brewer might have to pay up to A$5.20-A$5.40 to succeed, but now some believe A$4.90-5.10 will win the day, according to a Reuters poll.
Some analysts says Foster's may look to launch a share buyback or pay a special dividend in order to thwart SABMiller, and some shareholders said this was a possibility.
Citi analysts said in a recent note that Foster's has the capacity to return A$1-A$1.5 billion in cash to shareholders, predicting Foster's was more likely to return between A$500 million and A$1 billion, with more to come in the medium term.
Analysts say there are unlikely to be any antitrust problems in a SABMiller-Foster's combination, nor are any rival bidders expected to surface. ($1 = 0.953 Australian Dollars)
(Reporting by Miranda Maxwell, Sonali Paul and David Jones; Editing by Balazs Koranyi and Will Waterman)
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