SABMiller Buys Brewery Giant Foster’s for $10 Billion

By Caroline Dobson
Caroline Dobson
Caroline Dobson
September 22, 2011 Updated: October 1, 2015

MELBOURNE, AUSTRALIA: Australia's largest and most iconic brewer, Foster's, last night sold to London-based South African brewing giant SABMiller in a deal worth $12 billion. Foster's Group brands include some of Australia's leading brews such as VB, Cascade, Crown Lager and Carlton Draught. (Mark Dadswell/Getty Images)
MELBOURNE, AUSTRALIA: Australia's largest and most iconic brewer, Foster's, last night sold to London-based South African brewing giant SABMiller in a deal worth $12 billion. Foster's Group brands include some of Australia's leading brews such as VB, Cascade, Crown Lager and Carlton Draught. (Mark Dadswell/Getty Images)
After months of negotiations, Australia’s largest brewing company Foster’s Group Ltd., was sold to British brewer SABMiller Plc, for $10.2 billion.

"It became obvious that we were not that far apart so we started talking last week and this week I sat down with David Crawford for a couple of beers," said SABMiller Chief Executive Officer Graham Mackay at a press briefing after the announcement of the takeover.

According to Bloomberg, Fosters agreed to the take over at AU$5.10 (US$5.00) per share, and in 24 hours the shares rose 7.6 percent to AU$5.26. The completed deal will consist of SABMiller offering a total of $5.53 for each Foster’s share, which will amount to AU$10.7 billion. Although the settlement figure will be AU$12.3 billion, there is around $1.5 billion worth of net debt assumed by the acquirer.

The Melbourne-based company has 2,300 employees and has been brewing its own beer since 1854. Although the Foster’s board has supported the sale to SABMiller, despite rejecting its initial offer of AU$4.90 per share. The shareholders are due to vote on the deal in December, and the deal is yet to receive approval from the Australian government.

Historically, Foster’s has had a steady track record with its high profit margins. However in August, the Australian brewer of name brands such as VB, Carlton Drought and Crown Lager announced a full year net loss of $87.3 million (AU$89 million), with a shrinking local market share and job losses in the industry. Inevitably the strong Australian dollar, which rose above parity with the U.S. dollar toward the end of 2010, would have impacted exports and hurt the company’s bottom line. Similarly the wine industry has also suffered a downward trend due to a combination of factors beyond the inflated currency, with an oversupply of grapes and wine, as well as the global financial crisis.

Foster’s is considered to be one of the most famous icons for Australia, and will be owned by a British-based multinational and one of the world’s largest brewers, SABMiller.

According to its chief executive John Pollaers, the transaction will be “very good value for the company.”

The second largest Australian beer conglomerate, Lion Nathan, became a foreign-owned company, after Japan’s Kirin Holdings Company Ltd., bought out the firm in 2009.

SABMiller is the world’s second largest brewing company, after Anheuser Busch InBev, and owns brands such as Miller Genuine Draft and Pilsner Urquell.