Mystery buyer named
Someone has been buying up shares in Foster’s. Who could it be? A bank? An investment fund? A competitor? Step forward – North American brewer Molson Coors. Interestingly, the three brewers have been in bed together before. The three-way relationship came to an end a decade ago when Foster’s sold its half share in Canadian venture Molson Breweries for AUD 1.1 billion to Molson, as the beer maker was known before its merger with Adolph Coors. Now Molson Coors has been revealed as the mystery buyer of a significant stake (5%) in Foster’s in October 2008. The market responded positively on 6 November 2008 with shares rising 24¢ to AUD 6.09 and some watchers think Molson “is buying a seat at the table” ahead of any carve up of Foster’s brand portfolio.
Molson Coors Brewing, the third-largest US beer maker, said it had a 5 percent interest in Foster’s Group as the Australian company weighs the future of its wine division.
Molson Coors said it acquired an "economic exposure" to Foster’s via a cash-settled total return swap arranged in Australia by Deutsche Bank. That means that Molson Coors has not bought Foster’s stock itself but has used Deutsche Bank as a counterparty.
According to local media reports, Foster’s, which is Australia’s major brewer, does not know Molson’s intentions for the purchase. Molson Coors acquired the stake in Foster’s as the Australian company considers selling parts or all of the wine unit, where profit slumped and AUD 770 million of writedowns led to the company’s first loss in 16 years.
Foster’s has a market value of AUD 11.6 billion and controls about 55 percent of the Australian beer market with brands including Victoria Bitter, Crown Lager and its namesake lager. The wine unit, the world’s largest behind Constellation Brands, has labels including Rosemount, Beringer and Lindemans.
Molson Coors, which was created in 2005 through the merger of Molson with Adolph Coors, lost the U.S. licensing rights to Foster’s beer last year. In June 2008 it merged operations in the U.S. and Puerto Rico with those of SABMiller, the second-largest brewer in North America.
Currently, Foster’s is reviewing its operations with the aim of finding a solution for its underperforming wine division. Foster’s Chairman David Crawford, who said Foster’s paid ‘ ‘ too much’’ for its wine assets, is considering all options for the business that cost AUD 6.8 billion and took ten years to create. The review is expected to be completed this year with the outcome to be announced in February 2009 when Foster’s releases its half-year results.
Until then, market observers do not expect any further action by Molson Coors.
Foster’s beer business may be worth between USD 7.7 billion and USD 8.4 billion, compared with Molson Coors’market value of USD 7.6 billion.
Molson Coors buying Foster’s – some food for thought. Obviously, history can repeat itself – even if only in reversal.
