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Foster's rebuffs $2.1 billion bid for wine unit

  • Though best known for its beer, Foster's has a major stake in the U.S. wine industry. In Sonoma County, it owns Chateau St. Jean and its Napa Valley properties include Beringer Vineyards, St. Clement, Etude and Stag's Leap Winery. (SCOTT MANCHESTER/Press Democrat)

Foster's Group said Wednesday that it had rejected an unsolicited bid from an unidentified private equity firm offering from 2.3 billion to 2.7 billion Australian dollars for its wine business, which it said it planned to spin off from its beer operations.

The nonbinding cash bid, equivalent to $2.1 billion to $2.5 billion, “significantly undervalues Treasury Wine Estates and its future prospects,” Foster's said, while maintaining that it was committed to a separate listing of the two beverage businesses. Foster's declined to reveal the bidder's identity.

“This puts the whole company in play. If you are one of the big brewers, you probably didn't want to be saddled with a wine business you didn't understand or want,” Tom Elliott, managing director of hedge fund MM&E Capital, told Reuters.

The company's shares rose 27 cents, or 4.45 percent, to 6.34 Australian dollars on the Australian Securities Exchange.

Though best known for its beer, Foster's has a major stake in the wine industry. In Sonoma County, it owns Chateau St. Jean and its Napa Valley properties include Beringer Vineyards, St. Clement, Etude and Stag's Leap Winery. Other well-known brands include Australia's Lindemans, Penfolds and Rosemount and Italy's Castello di Gabbiano.

Foster's, the largest alcoholic beverage maker in Australia, said in May that it planned to list its beer and wine operations separately so that they could each develop their own corporate strategies.

SABMiller and Asahi Breweries have both shown interest in Foster's beer operations, worth about $10 billion, The Sunday Times and Reuters reported last month.

The wine business is thought to be worth considerably less, as it faces greater competition at home.

The unit “continues to be impacted by oversupply in Australia, subdued consumer demand in key international markets and a strong Australian dollar during the 2010 financial year,” Ian Johnston, chief executive of Foster's Group, said in May.

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