UPDATE: Foster’s to cast off wine; beer profit disappoints

on 15/02/11 at 11:17 am

Industry

* Investors to get 1 wine share for every 3 Foster’s shares

* Split could entice bidders including SABMiller, MolsonCoors

* First-half profit down 5.6 pct as beer volumes slide

* Australian beer market declines in cool, wet summer

* Shares end flat vs soft broader market (Updates with comment from briefing; closing share price)

Foster’s Group , Australia’s largest brewer, pushed ahead on Tuesday with plans to split its beer and wine businesses, but it risked dampening bidder appetite for either unit by also reporting soft first-half profits.

The move could elicit interest from the likes of world No.2 brewer SABMiller for Foster’s $10 billion beer unit — one of the last prizes in the globally consolidating beer market.

Foster’s said the split, to be completed in May, would help each business pursue its own strategy after efforts to jointly market the two failed.

“As they do the demerger, it promotes the possibility of them becoming a target but the earnings will leave them looking somewhat vulnerable,” said Angus Gluskie, portfolio manager at White Funds, which is a shareholder in the company.

“An acquirer has to be comfortable that there are some structural declines in that industry, primarily the traditional beer brands are really struggling to maintain their place in the market,” he said.

The wine spin-off marks the end of a decade-long expansion, in which Foster’s had spent around A$6 billion building its portfolio buying Southcorp and Beringer to create the world’s second-largest wine company.

{Full story via Reuters}

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