Foster's claims Southcorp wine with a 19 per cent stake
biggest winemaker, Southcorp, preventing rival bidders from taking
it over and keeping it in Aussie hands.
Under Australian law, a bidder needs acceptances for 90 per cent of a target company in order to acquire the rest, meaning Foster's can use its stake to prevent a rival bidder taking over the company.
The 18.8 per cent stake was that of the Oatley family's. Mr Oatley, the founder of Rosemount Estates, was said to have wanted to keep ownership of the company in Australian hands. In 2001, he vetoed bid than from UK company Allied Domecq for Rosemount, chosing to sell at a lower price to fellow Australians Southcorp.
Foster's yesterday agreed to pay A$583million (US$447million) to become the largest shareholder in the company, and is likely to eventually takeover the whole business. This would cost at least A$3.1 billion ($2.4 billion) and make it the largest wine producer in the world, with 30,000 acres under vine.
Wine companies have made many acquisitions recently. Last month Diageo bought the Chalone Wine Group for $260 million and in November Constellation Brands paid over $1 billion for the Robert Mondavi Corporation. Southcorp shares rose 27 per cent with speculation that it would also be a candidate for takeover.
With Penfolds, Rosemount and Lyndeman's, Southcorp's portfolio is strong. Penfold's is Australia's most expensive and internationally recognised wine, with 'Penfold's Grange' selling at about A$300 a bottle on release. Rupert Clifton-Bligh of Berren Asset Management in Sydney said, "you can't go out and create a brand like Penfolds. It has history and market presence. You end up buying it and it's not going to come cheap."
Foster's, which brews Australia's top-selling Victoria Bitter beer, created a global wine business in 2000 by buying California based Beringer Wine Estate Holdings for $1.5 billion and merging it with its Australian unit Mildara Blass.
The latest deal is a change in strategy for Southcorp's chief executive, Trevor O'Hoy, who had pledged to focus on improving profit at the wine business after earnings fell 32 per cent in the year ended June 30. The company only returned to profitability last year after a A$920 million loss in 2003. He had said in November that involvement in consolidation was at least 12 months away
