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Foster’s Value Gap to SABMiller Bid Shrinks in ‘Stalemate’

Foster’s Value Gap to SABMiller Bid Shrinks
Foster's Group Ltd. stock has gained 13 percent since June 20, the day before the SABMiller Plc offer was rejected. Photographer: Carla Gottgens/Bloomberg

The gap between the market value of Foster’s Group Ltd. and SABMiller Plc’s rejected A$9.5 billion ($10.1 billion) takeover bid has almost halved as speculation of a higher offer fades.

Foster’s traded as low as A$5.08 today, 18 Australian cents higher than SABMiller’s A$4.90 cash offer, before closing at A$5.09 today, up by 0.2 percent. The stock had traded as high as A$5.23 since the deal was rejected by Australia’s biggest brewer on June 21 as too low.

The Australian beermaker hasn’t been in contact with the London-based brewer of Peroni and Grolsch since last month, when it turned down the offer and SABMiller said it would “seek engagement.” The Melbourne-based company is instead focusing on cutting costs and boosting spending on brand promotion to stem market share losses in Australia for its top-selling beer Victoria Bitter.

“The market is starting to realize that it appears no one else is going to come in with a counterbid, and that SABMiller is in no hurry to re-engage,” said Trevor Stirling, an analyst at Sanford C. Bernstein in London.

SABMiller Rebound

SABMiller shares have rebounded from as low as 2,074.5 pence on June 23, climbing to their highest price ever on July 8 as concern eased about the rationale of acquiring Foster’s.

Foster’s has gained 12 percent since June 20, the day before the offer was rejected. SABMiller fell 0.7 percent to 2,323 pence yesterday. SABMiller rose 0.2 percent to 2,328.5 pence as of 9:05 a.m. in London trading.

SABMiller could afford to pay more for Foster’s, according to analysts surveyed by Bloomberg News, even though an acquisition would dilute the London-based brewer’s exposure to faster-growing emerging markets. Any purchase would give SABMiller access to about half the Australian beer market, including the eponymous Foster’s brand, as well as a business with some of the highest margins around the world.

Andrew Butcher, a spokesman for Foster’s external media adviser Butcher & Co., declined to comment, affirming there has been no change in the company’s stance on the bid.

Wine Spinoff

Foster’s spun off its Treasury Wine Estates Ltd. unit in May, spurring speculation that both parts of the business would attract bids. Grupo Modelo SAB de CV, the Mexican brewer of Corona, and Molson Coors Brewing Co. had explored a possible joint bid for Foster’s, five people with knowledge of the matter said June 3. Japan’s Asahi Breweries Ltd. may also be interested in the company, two people close to the situation have said. No brewer apart from SABMiller has made a public offer for Foster’s.

“SABMiller is the only bid out there and may be the only one made,” said Theo Maas, who holds Foster’s shares and helps manage about $5.4 billion at Arnhem Investment Management in Sydney. “I wouldn’t be overly happy as a SABMiller shareholder if they go higher than this. Going hostile at A$4.90 probably won’t get them anything, so it’s a bit of a stalemate.”

The gap between Foster’s shares and SABMiller’s offer was 33 cents on June 27. At today’s low, the spread was 45 percent narrower at 18 cents.

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