October 25, 2011 / 2:30 AM / 6 years ago

Australia's Foster's lashed for SAB deal; wine spin-off shines

A Foster's logo is seen on a beer pump at an Australian themed bar in west London August 18, 2011.Toby Melville

MELBOURNE (Reuters) - Foster's Group Ltd FGL.AX, Australia's largest brewer, said it expects beer sales to pick up again when the economy improves, fuelling small shareholder anger at the company's capitulation to a $10.4 billion takeover by global giant SABMiller SAB.L.

Foster's executives were forced to defend the takeover before around 200 shareholders at what is likely to be the brewer's last annual meeting, saying the deal offered the certainty of cash in a volatile global environment.

"You are now presenting us with a bright future for Foster's and you are turning around and getting rid of this company. It is disgraceful of the board," said one small shareholder, Douglas Fleming, to widespread applause.

Another shareholder's question was inaudible as she broke down in tears.

In September, Foster's agreed to accept a sweetened A$9.9 billion ($10.4 billion) offer after an acrimonious three-month battle by SABMiller to win over management. The A$5.10-per-share offer was a A$0.20-per-share increase on a previous bid.

The takeover, which requires approval of 75 percent of votes at a meeting due in early December, has wide support from institutional investors.

Foster's, the maker of Victoria Bitter, Carlton Draught and Pure Blonde, will also undertake a 30 cents-a-share capital return and pay a final dividend of 13.25 cents under the deal.

Foster's shares traded flat at A$5.31 on Tuesday.

The company has been struggling with declining volumes as demand for traditional beers falls, and its market share has fallen to 50 percent from 55 percent. But it said there has been some improvement in consumer confidence in recent months.

Chief Executive John Pollaers told shareholders the company was planning a "massive" marketing campaign over the next few months to help arrest the slide in volumes.

"We believe that once Australia moves through this period of economic uncertainty, the beer category will return to the long-term trend of moderate growth," Pollaers said.

After SABMiller, the London-based brewer of Peroni, Miller Lite and Grolsch, takes control of Foster's, about 90 percent of Australian brewing will be in offshore hands. The remaining 10 percent is mainly with small craft breweries.

Wine Cousin Fares Better

Faring better in recent sales is Treasury Wine Estates, (TWE.AX), the wine business of Foster's that was spun off in May, thereby paving the way for a takeover of the beer group.

Treasury, the world's second-largest bottled wine maker after Constellation Brands STZ.AX, has seen its share price gain 21 percent since listing in May, while the broader Australian market has fallen 10 percent.

Its brands include Beringer, Penfolds and Rosemount.

Executives told Treasury's first shareholders' meeting the wine category continues to perform well in Australia and New Zealand, and wine demand was growing in the United States and Europe where the company generates about 70 percent of sales.

"In the U.S. and our key markets within Europe, the consumer environment remains subdued, yet within these markets, the wine category has remained relatively resilient," Chief Executive David Dearie said.

But he cautioned the outlook in both markets was still uncertain and could deteriorate.

Treasury shares were down 2.6 percent at A$3.80.

($1 = 0.959 Australian dollars)

Editing by Lincoln Feast and Vinu Pilakkott

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