Foster’s Group has agreed to be bought by global brewing giant SABMiller, for just over 63 cents more than the original $4.90 offer price it knocked back.
In a statement issued last night Foster’s described the higher offer as "compelling".
But it also left the door open for a better offer, but it is hard to see that happening given no counter offer has appeared since SAB Miller launched its offer two months ago..
Foster’s board recommended a better offer of $5.5325 cash per share, which valued the target at $10.7 billion.
The new offer values the company at a total of $12.3 billion.
The improved offer comprises $5.10 cash a share, 30 cents cash a share pursuant to an equal capital reduction, and a 13.25 cents a share final dividend for 2010-11 for shareholders who owned the shares on September 7.
Foster’s had previously rejected SABMiller’s original bid of $4.90 per share, which valued the target at $9.5 billion, as being too low.
The bid compares to Foster’s closing share price yesterday of $4.89, which was down two cents on the day.
The company said in a statement that it had entered into a scheme implementation deed with SABMiller.
"This is a compelling proposal from SABMiller and represents the value inherent in this iconic Australian company and in its brands and people," Foster’s chairman David Crawford said in the statement.
Foster’s chief executive John Pollaers said the main attraction of the second offer was the lack of substantial conditions.
"The only way that I can think about it is how the man in the street is going to think this through: ultimately, compared to the $4.90 that I would have had in my hand with very significant conditions attached, now I will have $5.5325 in my hand," Mr Pollaers told a teleconference.
"That is the way to think about it – what is the cash in the hand here?"
He said Foster’s was focused on the SABMiller proposal, but "should a superior offer emerge, we’ll be in a position to consider it".
“Foster’s will become an important part of our business, and through the application of our commercial capabilities and global scale, we expect to build on the initiatives that Foster’s management has put in place, further enhancing Foster’s performance and creating value for our shareholders,” SABMiller Chief Executive Officer Graham Mackay said in a statement issued in London and Australia.
"SABMiller and Foster’s have agreed that the offer will be effected by means of a scheme of arrangement to be proposed by Foster’s to its shareholders," SAB Miller said in its statement.
"The scheme of arrangement is recommended by the Foster’s board and is subject to a number of customary conditions, detailed in a scheme implementation deed, the principal terms of which are summarised in Attachment 1 to this announcement.
"The scheme implementation deed provides for the ordinary conduct of Foster’s business from signing until completion, and arrangements for merger and implementation planning before closing. It specifies that in certain circumstances, including if a higher valued competing transaction is announced and completed within twelve months, Foster’s will pay to SABMiller a break fee of A$99 million, being 1% of the equity value of the recommended transaction."
"As previously announced, SABMiller has separately reached agreement with Coca-Cola Amatil Limited to be able to acquire its share of the Pacific Beverages Pty Limited joint venture should SABMiller acquire a controlling interest in Foster’s.
"SABMiller has entered into a number of cash settled equity swap contracts that provide it with an economic exposure equivalent to 78 million shares (being approximately 4.0% of the total number of issued Foster’s shares), which will reduce SABMiller’s aggregate cash cost of the transaction consideration by approximately A$69 million."
