SAB went hostile with its bid yesterday, taking the $10bn (€6.9bn) offer straight to the Fosters’ shareholders.
This followed the rejection of SAB’s bid by the Fosters board in June for being too low.
On the announcement of its new offer, SAB said there had been “no willingness to engage” from the board, which is why the firm was taking the bid directly to Fosters’ shareholders.
In a statement made today, the Fosters board said it thought the $4.90 share price significantly undervalued the company.
Fosters said it had sent its views on the bid to its shareholders, advising them to take no action and ignore all documents and communications from SAB related to the offer.
In response to yesterday’s bid, Morningstar analyst Philip Gorham said given the strategic and financial advantages of a consolidation, he was surprised by the board's lack of interest in negotiating with SAB and expected the shareholders to be more forthcoming.
“In an industry in which scale is critical to gaining a cost advantage, SABMiller could leverage the Foster's brands, which include Foster's, Carlton, and Victoria Bitter, by slashing back-office costs and introducing the brands into international markets on its own distribution platform,” said Gorham.
“Foster's already has a limited international footprint, including material market share in the UK and New York City markets, but has significant room for growth across Europe and North America,” he added.
SAB's bid outstrips the AUD 8.3bn ($8.8 bn) rumoured to be offered by Molson Coors TAP and Grupo Modelo. It represents around 12.5 times 2011 EV/EBITDA, a reasonable price based on recent deals in the industry, he said.
“SABMiller has the financial muscle to increase its offer and we believe it will do so, particularly as the Australian dollar has depreciated slightly since the original offer was made in June,” Gorham added.
The analyst said the price could go higher if other players such as Anheuser-Busch InBev BUD, or even Heineken, enter the race. However, he said with SAB having already shown its hand, other suitors probably would have emerged by now.