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Fosters Group

By Dan Stratful

Thursday 6th October 2011

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SABMiller's takeover offer for Fosters Group (FGL) has taken another turn with SAB sweetening its offer to $5.53 per Fosters share, up from its first bid of $4.90. Brewing giant SABMiller has reportedly spent time removing legal and commercial problems in order to pave the way for the bid, however SAB's first bid of A$4.90 per share was rejected by Fosters. With SABMiller's first bid of $4.90 rejected SAB has had to improve its offer to a combined offer of $5.53 per FGL share.

The offer consists of:
$5.10 cash per share;
a 30c 'Capital Return"; and
a 13.25c per share final dividend.

The Fosters Board unanimously recommends shareholders vote for the Scheme of Arrangement and approve the bid.

In its financial year ending 30 June 2011, FGL reported earnings before interest and tax and before material items of $816.7 million, an 8% decrease on the prior year. The decrease reflects a 6% decline in Australian beer category volume and higher corporate costs relative to the prior year which included one time benefits. CUB’s EBIT declined 6.2%, in line with the decline in the Australian beer category. However, improved cost efficiency mitigated the impact on CUB earnings and allowed CUB to increase advertising and promotion by more than 4%.

Earnings per share from continuing operations before material items fell 8.9% to 25.6 cents. Foster’s declared a final dividend for fiscal 2011 of 13.25 cents per share. The total dividend for fiscal 2011 was 25.25 cents, representing an 83% payout ratio. During the year, Foster’s has completed the first phase of initiatives to turn around performance, addressing fundamental business challenges and establishing a strong foundation for future growth. Also, its demerger of Treasury Wine Estates completed in May 2011. FGL’s CEO said “this has been a transformational year for Foster’s and I’m pleased to say that the turnaround is on track”.

SAB’s bid for Fosters is more evidence of M&A activity in the beverage market which has seen acquisitions of Charles Group, Lion Nathan, 42 Below Vodka, and Independent Liquor.

Investment Research Group (IRG) recommends Fosters shareholders ACCEPT OFFER or for those not prepared to wait for the paperwork to arrive, should SELL their shares on market at close to the takeover offer price of $5.53.

Fosters shares today traded at $5.29

For sharemarket and fixed income trading enquires contact:
Dan Stratful at Investment Research Group (IRG)
Authorised Financial Adviser (AFA)
0800 437 8489, 09 304 0232, dan.stratful@irg.co.nz
**A disclosure statement is available, on request and free of charge by calling 0800 437 8489, 09 304 0232 or dan.stratful@irg.co.nz


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