Australia’s Beer Market Getting a Shake Up

Coors may be getting ready to make a bid for Foster’s, Australia’s largest brewer and winemaker.

One member of Canadian founding family of Molson Coors Brewing Co. sees the company become a top global beer producer but won’t say if it is interested in making a bid for Australia’s Foster’s.

“Our appetite as Molson Coors Brewing Co. is to be one of the best and biggest brewing companies in the world and we’re always looking for opportunities to grow,” Geoff Molson told reporters after speaking to the Montreal Chamber of Commerce.
“But I’m not going to comment on what Molson Coors’ plans are for this,” he said.

Molson Coors is seen as a possible bidder for the company, with its five percent stake in Foster’s Group Ltd., which announced that it will split its beer and wine divisions. It could attract bids of up to $10 billion from suitors including SABMiller and Asahi, after a long-awaited decision to split off its struggling wine business. Foster’s controls about half of Australia’s beer market.

Among possible bidders are Diageo, Schweppes, SABMiller’s joint venture with Coca-Cola Amatil, along with Suntory Holdings Ltd. and Sapporo Holdings Ltd. of Japan.
Analysts and fund managers say potential predators have been reluctant to move on Foster’s, despite one of the highest-margin brewing operations in the world, because of the work needed to turn around the wine operations amid a global glut.

“At least this clears the way for potential bidders to look at the company,” said Brian Han, portfolio manager at Constellation Capital Management, which owns Foster’s shares.
Molson Coors Chairman Peter Coors said he would be interested in Fosters, according to press reports.

Still, Molson Coors, which owns a 5 percent stake in Foster’s, would need to team up with a beer giant such as Carlsberg for financial firepower, analysts said.

“Amatil would definitely be interested and the logic of putting together a beer and soft drinks company is inescapable because they are very similar products. It makes a lot more sense than a wine and beer company,” said Tom Elliott, managing director of hedge fund MM&E Capital that takes stakes in merger situations. “But all the big global beer players will have a look at it,” explained Elliott, whose fund owns shares in Foster’s.

Theo Maas, an analyst at Arnhem Investment Management, told the Australian media that he expected SABMiller’s Australian joint venture with Coca-Cola Amatil to emerge as front-runner for the beer unit.

Meanwhile, Geoff Molson said he doesn’t foresee the brewer following the lead of auto parts company Magna International by abandoning its dual share structure.

A bid for Southcorp, the Australian winemaker, by brewer and wine maker Foster’s may result in a round deconsolidation according to some industry watchers.

Analysts predicts that Foster’s will sell some of its wine brands in order to satisfy the competition authorities if it buys Southcorp. The front contender to buy the brands so far is fellow Australian McGuigan Simeon.

“Foster’s will certainly have more brands than they need, and it would certainly make life easier with the ACCC if they flick a few off to someone,” a banking source told Reuters earlier.

It is thought a bid fromFoster’s could also stir interest from other quarters. With Diaego and Constellation already busy assimilating recent acquisitions, Allied Domecq has been named as a possible rival suitor for Southcorp. The UK-based wine and spirits group has looked at acquiring in Australia before when it was beaten in a takeover race for Peter Lehmann Wines.

However, with Foster’salready owning a 19% stake, it may already be too late for rival bids.