SABMiller, Asahi eye Foster's beer unit: sources

SYDNEY/LONDON (Reuters) - Brewing groups SABMiller SAB.L and Asahi Breweries 2502.T are looking at Foster's Group's FGL.AX beer operations, valued at more than $10 billion, but have not yet made any formal offers, sources said.

Long-running interest in the Australian brewer’s beer business, know as Carlton & United Breweries, resurfaced on Monday after newspaper reports said SABMiller was considering buying Australia’s biggest brewer.

Foster’s said in May it would split the beer unit from its ailing wine business, putting its valuable beer operations with brands including Foster’s Lager, Victoria Bitter and Pure Blonde at the center of takeover talk in the brewing world.

The Australian beer market is a virtual duopoly with some of the highest profit margins in the brewing world and Foster's controls half the market, with most of the rest held by Kirin-owned 2503.T Lion Nathan. The national beer market is broadly stable rather than in decline like Western Europe.

Most of the other big brewers such as Anheuser-Busch InBev ABI.BR, Heineken HEIN.AS and Carlsberg CARLb.CO are likely to be restricted from bidding due to high debts from previous deals, and so analysts expect a narrow field in an auction.

A SABMiller spokesman had no comment to make on Foster’s and said it planned no announcements on Monday. After an early fall, SABMiller’s shares rose 0.5 percent to 18.60 pounds by 7 a.m. EDT.

Analysts expect any suitors will only emerge after Foster’s splits off its wine division in early 2011 when complex debt and structural issues are resolved, and they were doubtful over an early beer sell-off deal.

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“We remain skeptical that any bid will come here before the planned demerger of the beer division in early 2011,” said analyst Ian Shackleton at brokers Nomura in London.

Analyst Matthew Webb at JP Morgan Cazenove believes SABMiller will look at Foster’s beer business, could entirely debt fund the deal, be moderately earnings enhancing in the first year and make annual cost savings of around $150 million.

He values Foster’s beer business at a historic 13.3 times core EBITDA earnings putting a value on it of $11 billion.

Asahi, Japan’s No.2 brewer after Kirin, is also interested in Foster’s, sources said. It has been building up a war chest for acquisitions and keen to expand outside Asia, but Asahi declined to comment. Nomura and Rothschild are advising Asahi.

“SAB and Asahi are the two names that keep popping up and given the demerger process in train you would expect people who ever thought they might look at Foster’s to get teams together to do so,” said one source familiar with the situation.

Bottles of Fosters beer are seen in a refrigerator at a liquor store in Melbourne in this February 16, 2010 file photo. REUTERS/Mick Tsikas/Files


Analysts say Foster's beer could also be a target for Canadian brewer Molson Coors TAP.N, which owns a derivative- based 5 percent stake in Foster's, and Coca-Cola Amatil CCL.AX which has a joint venture with SABMiller in Australia.

The takeover talk pushed Foster’s shares up more than 7 percent to their highest level in more than two years, with volume three times the daily average over the past 30 days.

The shares closed up 7.6 percent at A$6.26.

Responding to a media report in Britain’s Sunday Times over SABMiller’s interest, Foster’s said on Monday it was not aware of any unannounced information driving the stock.

The Australian newspaper reported on Monday that SABMiller had hired JPMorgan and Royal Bank of Scotland as advisers for a potential bid but no decision had been made. Sydney-based Gresham Advisory Partners is advising Foster’s.

SABMiller, which is the world’s second largest brewer after AB InBev and brews Peroni, Miller Lite and Grolsch already owns the brewing rights to Foster’s beer in the United States and in India, while Heineken owns the rights in Europe.

Asahi President Naoki Izumiya said this month he expects to have $9.2 billion for acquisitions over the next five years, with eyes on Asia and Oceania. It has already bought Cadbury's Australian soft drinks business Schweppes for $995 million and a 19.9 percent stake in China's Tsingtao Brewery 600600.SS for $667 million, both in 2009.

Japanese brewers have been scrambling to diversify, mainly by overseas acquisitions, to cut their reliance on the local beer market, which has lost 15 percent in volume in the past decade due to a sputtering economy and shrinking population.

Additional reporting by James Topham in Tokyo; Editing by Anshuman Daga and Louise Heavens