Japanese swear off Foster's beer assets

JAPANESE beer group Asahi Breweries has taken itself out of the running to buy Foster's beer arm in the lead-up to the Australian group's historic $11 billion demerger, further thinning the ranks of possible buyers.

By InvestSMART · 10 Feb 2011

By InvestSMART ·
10 Feb 2011

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At an earnings briefing in Japan overnight, Asahi president Naoki Izumiya said he had no interest in Foster's beer assets, which include a portfolio of leading brands such as VB, Carlton Draught and Cascade.

"The price is expensive and recently (Australia's) market is looking tough," Mr Izumiya said.

Last year's decision by the Foster's board to split its beer division from its global wine operation sparked speculation that a rival brewing company would swoop on the beer assets, with Asahi and British brewer SABMiller touted as front runners.

But no company has come forward with a takeover proposal, increasing the odds that Foster's will strike its demerger without a bid disrupting the process.

Japanese brewing and food manufacturers have been particularly interested in buying overseas consumer goods businesses to broaden exposure outside their stagnating domestic market.

In 2009 Kirin, which also owned National Foods, launched a $3.5 billion acquisition of Lion Nathan, handing it a range of popular beers and beverages. Also two years ago, Asahi Breweries bought Schweppes Australia's soft drink operation for $1.185 billion.

In August, Mr Izumiya said that Asahi was considering expanding ties with South Korea's top beverage company, Lotte Group, and that it wanted to increase its stake in China's Tsingtao Brewery.

Foster's will release its half-year results next week, when it is expected to provide details on the proposed demerger of the beer and wine businesses.

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Frequently Asked Questions about this Article…

Why has Asahi Breweries ruled itself out of buying Foster's beer assets?

Asahi president Naoki Izumiya said the price is expensive and Australia’s market is looking tough, so Asahi has no interest in pursuing Foster's beer assets.

Which Foster's beer brands would be included if the beer arm were sold?

The Foster's beer assets would include leading Australian brands such as VB (Victoria Bitter), Carlton Draught and Cascade.

Does Asahi’s withdrawal make a takeover of Foster's beer arm less likely?

Yes. With Asahi stepping back and no company having come forward with a takeover proposal, the article says it increases the odds Foster's will proceed with the demerger without a bid disrupting the process.

What is the proposed Foster's demerger and how big is it?

Foster's plans to split its beer division from its global wine business in a historic demerger valued at about $11 billion; the company is expected to provide more details when it releases half‑year results next week.

Which brewers were previously touted as potential bidders for Foster's beer business?

Asahi and British brewer SABMiller were widely touted as front‑runners in speculation over a possible bid for Foster's beer assets.

Has Asahi made other acquisitions in Australia before considering Foster's?

Yes. According to the article, two years earlier Asahi bought Schweppes Australia's soft drink operation for $1.185 billion.

Why are Japanese brewers interested in buying overseas consumer goods businesses?

The article notes Japanese brewing and food manufacturers have been especially interested in overseas consumer goods to broaden exposure beyond their stagnating domestic market.

What other strategic moves has Asahi signaled while ruling out Foster's?

Asahi has said it was considering expanding ties with South Korea's Lotte Group and wanted to increase its stake in China's Tsingtao Brewery, according to the article.