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Foster’s moves on Southcorp

Foster’s looks set to take over Southcorp after taking an 18.8% stake in the company and warning ‘a major announcement’ may be due.

Fosters today announced it had requested talks with Southcorp after taking the 18.8% shareholding for around AU$584m.

Such a takeover would create an industry giant with an estimated value of AUD$14.4bn (€8.35bn). A combined Foster’s-Southcorp would control about 30% of the nation’s multi-billion dollar wine market.

The stake the company has bought was the majority share owned by the Oatley family, founders of Rosemount which merged with Southcorp in 2001. Patriarch Bob Oatley was believed to have been approached by Foster’s several weeks ago.

Foster’s has been touted as a potential suitor for Southcorp for some time, especially following the drop in Southcorp’s share price over the past couple of years, thanks to an oversupply of cheap wine and poor marketing.

There has been speculation for years that Southcorp, whose main brands include Penfolds, Rosemount Estate, Wynns and Lindemans, might be the subject of a takeover deal. Foster’s, which owns Beringer Blass Wine Estates, had been rumoured to be interested

Foster’s has suspended trading in shares and announced it is ‘currently in discussions which may lead to a major announcement.’

The reasons behind the Foster’s bid remain unclear. Some analysts are predicting a friendly merger, though at the moment it is not clear whether Foster’s is making an out-and-out bid for Southcorp, or simply taking a strategic position in the light of a takeover bid by an overseas company like Allied Domecq or Diageo.

Others suggest Foster’s may sell off some of the most immediately profitable assets while retaining a controlling stake.

For their part, Southcorp executives are said to be furious that Bob Oatley has offloaded the shares he had held onto through the pits and troughs of Southcorp’s last three years, which has seen numerous executives sacked and others walking out, and constant press speculation about the future of the beleagured company.

At the same time the last few years for Foster’s have not been plain sailing, and analysts believe the restructuring – started when the company bought Californian producer Beringer in 2000 – is far from complete.

Industry watchers and Foster’s executives themselves have constantly repeated the mantra that the company was not in the market for any more big acquisitions.

Written by Anthony Rose, and Adam Lechmere

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