Foster’s £351m bonanza for investors puts pressure on SABMiller

The country’s largest brewer proposed to return money via a share buyback or capital reduction in an effort to get SABMiller to increase its A$4.90 (£3.11) a share cash offer, which Foster’s has twice rejected as too low. The defensive move came as Foster’s reported a slide in annual profits, beer margins falling for the first time in a decade and beer volumes under pressure, with analysts saying SABMiller needs only to offer a little more to succeed.

“It is probably one of the few options that they have, so it’s not unexpected that they’re doing that,” said Theo Maas, a portfolio manager at Arnhem Investment Management which does not own Foster’s shares. “But I’m not sure if in the bigger scheme of things it’ll make any difference,” added Mr Maas, who said he struggles to see a materially higher bid emerging for Foster’s.

SABMiller declined to comment on the results or the capital return, but analysts in London said after such underwhelming results SABMiller may only have to raise its bid to around A$5.10 (£3.24) a share to win over Foster’s shareholders.

“If this was a defence document, then it was distinctly lacklustre,” said one London-based analyst.

Foster’s, the maker of Victoria Bitter, Carlton Draught and Pure Blonde, reported a nine per cent slide in second-half profits, a rare decline that reflected a depressed beer market and potentially weakened its defence against SABMiller.

Its market share shrank with its profit margins, which were squeezed by a price war between Australia’s top supermarkets. Weak consumer spending, a shift away from beer drinking and a wet summer that affected demand also weighed on earnings.

Chief executive John Pollaers put on a brave face, saying the company was about halfway through a three-year turnaround, with cash flows improving and cost cuts being reinvested to promote its brands.

“The turnaround of this company is clearly on track. Market share has stabilised, correcting a long-term period of decline,” Mr Pollaers said.

“The key point is that we’re getting on with business as usual. We are running Foster’s for the long term.”

Mr Pollaers, the sixth chief of the beer group in seven years, made no mention of the SABMiller hostile bid.

“We’re as well placed as anyone, and I would almost go as far as saying better positioned than anyone, to manage the interests of our shareholders,” he added.