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Predator keen to revitalise premium beer market

SABMiller would use Foster's to launch super-premium beer brands in Australia to unlock tens of millions of sales dollars if its bid for the brewer succeeds, industry experts say.

Drawing on a successful history of boosting sales in the strong beer markets of the Czech Republic and Poland, analysts yesterday said the maker of Grolsch has plenty of scope to build premium brands in Australia.

Fosters shares gained 1.17 per cent in trading yesterday, finishing at $5.20, with investors continuing to back the the move by Foster's earlier this week to knock back a $9.5 billion takeover proposal - with many analysts saying the bid will have to grow to at least $10.5 billion to succeed.

Analysts are now predicting SABMiller will have to return with a price from $5.25 to $5.50 - rather than the $4.90 initially offered.

SABMiller was believed to be trying to meet Foster's chairman David Crawford in London for negotiations.

While SABMiller on Tuesday said any purchase would be funded from existing profits and new debt facilities, Bloomberg yesterday reported the brewer would raise $10 billion in debt.

Analysts predict the play for Fosters will be a long-haul by the cashed up Anglo-African brewer which they say is driven by a belief no other serious bidders will emerge.

Pundits yesterday drew a picture in which SABMiller could effectively stare down Foster's to extract the lowest possible price.

Two key tactics include waiting for the Aussie dollar to drop and for Foster's results to reflect the brewer's weak operating position to investors.

"SABMiller's opening proposal of $4.90 was not a knockout offer," Credit Suisse analyst Larry Gandler said.

To further complicate matters analysts yesterday said SABMiller itself could be a takeover target -- and that the move on Foster's could be a bid to pick up a strategically important asset to make themselves too expensive for a predator.

Analysts yesterday said Foster's could do more to increase its Australian market.

"Our visits to Poland and Czech several years back left us impressed with management's ability to drive per capita consumption of beer in these relatively high per capita consumption markets," Mr Gandler said.

But Merrill Lynch analyst David Errington said there was also earnings potential in replacing the Abbotsford brewery with a state of the art facility.

Mr Errington said there would also be earnings of up to $100 million in reclaiming the 5 per cent market share lost over the past half decade.

23 Jun. 2011

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