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S&N buys Foster's European business

By Anita Awbi , 12-Apr-2006

Scottish and Newcastle has taken over the Foster's lager brand in Europe, Turkey and the Russian Federation, after years of producing the amber nectar in these regions under licence for the Australian Foster's Group.

The sale follows speculation that S&N and rival SABMiller were both interested in buying parts of the global business licence. But Foster's decided to hold on to its Asian operations and brand name, selling only its European rights to S&N for £309m (€445m).

The number two British brewer will now be the sole benefactor of the brand whose sales have grown 10 per cent under its 11 year licence.

Tony Frogatt, S&N's chief executive said:"We are delighted to have secured a deal which consolidates a core brand under our ownership in our key markets.

"This has significant branding and strategic benefits and provides an enhanced platform from which we expect to continue to grow the highly successful Foster's brands."

S&N, famous for Kronenbourg lager and Strongbow cider, has been responsible for approximately 82 per cent of the total worldwide sales of Foster's by volume since acquiring the licence to produce the beer in 1995.

And the Foster's division accounted for 14 per cent of S&N's total profit in 2005. But now the company will be relieved of its £14m annual licence fee to the Foster's Group which has been siphoning off profits during the partnership.

The sale was in line with the Foster's Group desire to reposition itself as a leading wine producer across the globe. It currently holds the number two spot behind US-based Constellation following two major acquisitions.

Foster's bought Californian winemakers Beringer in 2000 for £915m and last year acquired Australia's largest wine group Southcorp for £1.34bn, bringing in the Penfold's, Lindemans and Rosemount Estate brands.

The group's CEO, Trevor O'Hoy said in a statement: "[The sale of Foster's Europe to S&N] allows us to break free of the shackles of the past, and move forward with a refreshed commitment to this icon Australian brand.

"We retain ownership of the brand outside Europe, in markets which account for approximately two thirds of global beer volumes," he added.

It is thought the proceeds of the sale will be used to repay debt accrued following the firm's recent wine company acquisitions.