Foster's rejects $2.5 billion takeover for wine business from unnamed private equity firm

Australia's largest brewer and the world's second-largest wine maker by sales, Foster's Group, today said that it has rejected an undervalued, unsolicited cash proposal worth up to A$2.7 billion ($2.5 billion) from a private equity firm for its wine assets.

But the unexpected takeover proposal from an unnamed private equity firm for Foster's newly-branded wine business, Treasury Wine Estates, puts a benchmark price on the business and opened up the possibility of other potential acquirers being lured to both its fledging wine and lucrative beer business in play.

Foster's has been subject to takeover speculation as recent as last month and SABMiller plc, one of the world's largest brewers, was reportedly mulling a $10.9-billion acquisition of Carlton and United Breweries (CUB), the beer making arm of Fosters Group Ltd. (See: SABMiller said to be mulling a $10.9 billion bid for Fosters Group)

Molson Coors and Japan's Asahi Breweries have also been named as potential buyers, as Heineken and Anheuser-Busch InBev are tied up consolidating their respective previous acquisitions - Heineken its $7-billion acquisition of Mexico's FEMSA and AB Anheuser-Busch InBev with massive $52-billion merger of Anheuser-Busch by InBev in 2008.

In a statement, Foster's said that the indicative, non-binding proposal significantly undervalues its Treasury Wine Estates division and its future prospects, ''The Board considers the indicative proposed value range, referred to above, significantly undervalues Treasury Wine Estates and its future prospects.''

Instead, the company said that it will push ahead with its plan of separating the wine business from the beer business through a demerger.