Investment News: Money Morning

By Mike Caggeso
Associate Editor

The whirlwind of recent beverage buyouts may continue, as Foster’s Group Ltd. (OTC: FBRWY) - Australia’s biggest beer and wine maker - may be a takeover target after it conducts a review of its wine business.

That assessment didn’t come from the company, however, but rather Merrill Lynch & Co. Inc. (MER) analysts. Foster’s Chairman David Crawford said in a conference call that he’d consider “all alternatives” about the company’s wine unit, which is the second largest in the world, Bloomberg reported.

A day before Merrill’s review, Chief Executive Officer and Executive Director Trevor Louis O’Hoy resigned after the company cut its earnings forecast and announced a $730 million write-down of its wine unit. O’Hoy will stay on board until a replacement is found.

Foster’s now expects constant currency earnings per share growth to fall between 5% and 7%, well below its previous guidance of approximately 10% growth.

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In 2005, the company doubled the size of its wine business with the $3 billion (A$3.2 billion) acquisition of Southcorp. Crawford said in a statement earlier this week that Foster’s didn’t execute the Southcorp integration to their expectations, making operating conditions more challenging.

Merrill’s report didn’t surprise Crawford, who said earlier this week that the company’s returns “are not acceptable.”

“We must also recognize and acknowledge that we paid too much to acquire wine assets… and the Board is fully focused on delivering value for shareholders,” he said in the statement. 

Beverage Providers Stirring Global M&A

Should Foster’s put itself on the block, it would join other major global beverage providers that have been on the giving and receiving end of billion-dollar buyout offers.

In late-May, news surfaced that Belgium-based InBev NV was considering a $46 billion takeover bid of American’s beer titan Anheuser-Busch Companies Inc. (BUD). InBev is the world’s largest brewer, whose line of beers includes Stella Artois, Beck’s and Brahma.

In March, France’s Pernod Ricard SA won a highly contested auction to buy V&S Group - makers of Absolut vodka and Cruzan rum - from the Swedish government for $8.9 billion.

In January, Carlsberg A/S and Heineken N.V. (OTC: HINKY) agreed to buy Scottish & Newcastle PLC for $15.4 billion.

And late last year, British-owned SAB Miller PLC (OTC: SBMRY) and Canada’s Molson Coors Brewing Co. (TAP), agreed to merge their U.S. brewing operations.

News and Related Story Links:

• Bloomberg:
  Foster’s Review of Wine Unit May Trigger Approaches

• MarketWatch:
  Foster’s CEO out as brewer cuts forecast: reports

• Foster’s Group:
  Financial Update and Resignation of CEO

• Money Morning:
  Global Beer Titan InBev to Make $46 Billion Offer for No. 1 U.S. Brewer, Anheuser-Busch

• Money Morning:
  Pernod Ricard $8.9 Billion Bid for Vin & Sprit Group Adds Absolut Vokda, Debt

 

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This entry was posted on Wednesday, June 11th, 2008 at 8:47 pm and is filed under Merrill Lynch, Top News. You can follow any responses to this entry through the RSS 2.0 feed. Due to the amount of comments we receive Money Morning will not be able to respond to all questions. If you have not already registered to leave a comment, once doing so you will receive Money Morning's Daily Email. Responses are currently closed, but you can trackback from your own site.