The backdrop:
SABMiller’s failed bid of acquiring Fosters in a deal that valued it at 10 billion USD. The deal was rejected by the Fosters’ board on grounds that it severely undervalued the firm.
About the Firms:
SABMiller: The largest beer manufacturer in the world, it has presence in 75 countries with over 200 brands and 70,000 employees. It’s major market lies in US, South Africa, Europe and North America and the brand “Castle Lager” is in its portfolio.
Fosters: The largest player in the Australian beer market with close to 50% market share and a number of successful brands in its portfolio.
About the offer:
SABMiller made a tender offer of AUD 4.90( USD 5.18) a share on June 20,2011which was rejected by the board.
The Analysis:
There are certain parameters to consider here in order to understand the decision behind SABMiller’s move:
- Fosters does not have a controlling family shareholder, which makes it easier for SABMiller to acquire it.
- Fosters’ strong brand equity will be a prize catch for SABMiller’s portfolio of products , thus further enhancing its market leadership as the second largest manufacturer
- The acquisition bid is particularly significant as it will give SABMiller control of 46% of the Australian beer market (Fosters’ share) in which SABMiller’s share is 1.8%
- The deal is directed at the booming and growing Austrailian economy
- The deal will provide Fosters the opportunity to further consolidate its position with the help of expertise from SABMiller
On the flip side of the deal are the various reasons:
- The international rights for Fosters are already sold
- There are lot of bidders in the race including Molson Coors Brewing Co. of US,Grupo Modelo SAB de CV of Mexico, Asahi Breweries of Japan and Anheur Busch InBev the world’s largest beer maker which is bound to shoot up the share prices in the run up to the bid.
- Fosters has been facing tougher competition off late in the Austrailian market from smaller niche players
Though the initial bid of 5.18 USD has been rejected by Fosters , the market reaction has been positive so far. So while the acquisition bid by SABMiller might not succeed even in future, Foster looks highly likely to be acquired by at a higher price which might be in the range of 5.40-5.50 USD per share in a deal that could be worth as high as 11 billion USD !
Tags: fosters sabmillerYou might like reading:
10 Amazing Branding Campaigns Of Pepsi Cola
Pepsi Cola is undoubtedly one of the most popular aerated beverages in the world. The drink was invented in the year 1893 by pharmacist Calhem Bradham as a digestive aid. The brand that we see has a long history during which it transformed itself as a popular consumer product and part of a global food and beverages empire. Here are […]
Runners-up : IMM Case Challenge 1 Solution by Sujoy Das
Select a test city As per the 2011 census data, demographics of children within age group of 0-6 years is as follows: [1] Children (0-6) Years In millions Total Male Female Census 158.79 82.95 75.84 State Wise distribution (Top 50% population of 0-6 age group of children) Uttar Pradesh (29.7 million) Bihar (18.6 million) Maharashtra (12.8 million) Madhya Pradesh […]
