SABMiller seals sweet deal

Brewing giant SABMiller agreed to buy Foster's Group for a sweetened price of $10.2-billion yesterday.

Talks between the two companies ended last week and were sealed with a round of drinks earlier this week.

Peace broke out in the acrimonious three-month bid battle as SABMiller CEO Graham Mackay offered to raise his cash bid by 20c to $5.19 a share and then sat down with Foster's chairman David Crawford to celebrate with a beer.

"It became obvious that we were not that far apart so we started talking last week and this week I sat down with David Crawford for a couple of beers," Mackay told a briefing after announcing the deal for Australia's biggest brewer.

As part of the deal, Melbourne-based Foster's will return 30c a share as capital it promised in August after a tax refund, and pay a final dividend of 13.25c.

The total value of the deal, including debt, is $11.7-billion.

Mackay expects SABMiller's biggest takeover deal to close by the end of the year and put the company at the head of the Australian beer market, with a near-50% share, giving the combined group an uplift from Australia's strong economic growth prospects.

Foster's CEO, John Pollaers, said the deal offered outstanding value for Foster's shareholders, emphasising the strength of the 150-year-old Australian beer maker. He has sought to turn around the business since his appointment in May.

"Today highlights once again the very bright future for Foster's and demonstrates what a prized business this is in the global beer industry," he said.

The former navy weapons engineer had previously defended the maker of Victoria Bitter, Carlton Bitter and Pure Blonde from the hostile SABMiller bid by returning cash to shareholders and trying to revive the brewer's earnings.

SABMiller shares were off 1.9% at $34.19, and by 0.49% in Johannesburg, to end at R265 in the JSE.

Foster's shares closed at $4.98 earlier yesterday, just before the deal was announced.

Analysts said the deal's value came at the higher end of recent beer transactions, but Foster's had one of the highest beer margins in the beer world and, as one of the few big brewers still available to buy, had scarcity value.

"I'm a bit surprised that the board has come back so quickly and approved a bid that looks to be only marginally higher," said fund manager Theo Maas, of Arnhem Investment Management, in Sydney.

SABMiller says the deal is part of its strategy of creating an attractive global spread of businesses to add to its operations largely in the emerging markets of Africa, Latin America, Asia and Eastern Europe, which are leading the recovery in the beer market worldwide.

The London-based brewer of Peroni, Miller Lite and Grolsch launched its initial bid for Foster's at $9.5-billion, or $5 a share on June 21 and then went hostile by taking the offer direct to shareholders, at the same price, on August 17.

But Foster's rejected both offers as being too low.

SABMiller has long been seen as the favourite to take over Foster's, with other big brewers being saddled by high debt after recent deals such as the world No1 InBev's costly $52-billion 2008 takeover of Anheuser Busch and world No3 Heineken, which bought Mexico's FEMSA Cerveza in 2010.

Foster's is seen as attractive, with its high profit margins, due to its virtual duopoly with Kirin-owned Lion Nathan - though beer volumes have sagged recently with a poor summer and a consumer downturn.

Foster's holds little other than beer interests, having retreated home from the global beer empire it once held and having split off its wine business earlier this year.

If Foster's agrees to a higher bid within 12 months, it has agreed to pay SABMiller a break fee of $101-million.