Sydney/Melbourne, Oct 2 - Foster's Group Ltd , Australia's largest brewer, could become the next player in the global consolidation of the beer industry after the company appointed advisers to help with a takeover defence.
Foster's beer business, which has a 52 percent market share in a duopoly in Australia, has been valued at about A$11 billion ($8.7 billion) by UBS, while the underperforming wine business could be worth up to A$4 billion.
"Obviously people are looking at it, but I think it becomes a harder deal to do (before) a break-up (of the wine and beer operations)," said a banking source, who declined to be identified, as he was not authorised to speak to media.
"Unless a person looking at Foster's plans to break it up themselves by potentially spinning off the wine business and offering it back to shareholders," he added.
Bankers said the appointment of Goldman Sachs as a defence adviser could also have been hastened by news last week that Deutsche Bank has accumulated a 5.26 percent stake in Foster's. But Deutsche Bank did not reveal the identity of the shareholder in a filing to the stock exchange.
"I would be surprised if it (the mandate to Goldman Sachs) is independent of that (DB revealing the stake)," the banker added.
Foster's shares have jumped 8.6 percent since news of the 5 percent shareholder, while the broader market has slipped 3 percent.
The beer industry has undergone much consolidation this year and although beer is generally seen as recession-proof, current financial conditions make the financing of any takeover bid a tricky proposition.
INTERNATIONAL INTEREST
Analysts say Molson Coors Brewing Co may be interested in Foster's, either on its own or potentially together with SABMiller Plc, with which it recently combined operations in the United States.
SABMiller, the world's largest brewer, already has a presence in Australia via a joint venture with Coca-Cola Amatil .
While Foster's high-margin beer business is considered attractive, its wine business which is the second largest in the world has been struggling and is under review.
A banking source, requesting anonymity because the matter was confidential, told Reuters that Goldman Sachs JB Were has been appointed to help Foster's with a defence strategy.
A spokesman for Foster's said the company would not confirm or deny whether it had any defence plan or whether it had appointed advisers.
However, spokesman Troy Hey said the brewer had a long-standing relationship with Goldman Sachs JB Were.
"Goldmans is Foster's long-term preferred banker and helped out on the acquisition of Southcorp," he said, referring to Foster's A$3.7 billion acquisition of wine producer Southcorp in 2005, with brands including Penfolds and Rosemount.
Foster's, which in July ousted Chief Executive Trevor O'Hoy who led the acquisition, has acknowledged it paid too much for the wine assets and may list the wine business separately or sell off some brands or vineyards.
Among potential buyers, SABMiller has the licence to the Foster's brand in the U.S. and owns it in India.
While speculation has also mentioned Heineken NV, the world's third-largest beermaker which owns the Foster's brand in Europe, it has taken on a large chunk of debt to fund its purchase of Scottish & Newcastle.
Fund managers wondered whether any deal was likely in the short-term given the turbulent state of financial markets and the difficulty of raising debt to fund a takeover.
"If anyone is thinking of a bid, it would be a day-to-day proposition depending on how the financing is going," said Tyndall Asset Management portfolio manager Craig Young. ($1=A$1.26)