Foster’s Group Ltd is focusing on its business rather than engaging with SABMiller Plc after rejecting a A$9.5-billion ($10.2-billion) takeover offer from the maker of Peroni and Grolsch, Chief Executive John Pollaers said.
The Melbourne-based company is concentrating on improving growth amid a tough retail environment in Australia, Pollaers said in a television interview on Australian Broadcasting Corp today.
“Our focus is let SABMiller do what they need to do, our focus is on this business,” he said. “The best way to maximise value is to have a well-run company that is unlocking the growth potential and that is relevant to consumers.”
Foster’s shares are trading 5.9 per cent above the A$4.90 a share offer as investors bet on a higher bid. SABMiller has said it can improve sales at Foster’s, which has endured years of market-share decline, though still controls about half of the country’s beer market.
Australian retail sales advanced 1.3 per cent in the 12 months ending June 30, the worst financial year performance in two decades, according to a Deloitte Access Economics report. The Reserve Bank of Australia said in May that “significant divergences between different sectors of the economy presented challenges for policy making,” as the biggest mining boom in a century clashes with weaker consumer spending.
“We’ve had a very tough year,” Pollaers said. “I think most Australians are feeling it tough, and most beer consumers are feeling it tough.”
MAJOR IMPROVEMENTS
Buying a business that already has among the highest margins of all the major brewers means it may be difficult for London-based SABMiller to make major improvements.
Foster’s beer business had a margin, which measures earnings before interest and taxes as a proportion of revenue, of 37 per cent in the 12 months ended June 2010, the highest of any independent brewer in the world.
In May, Foster’s spun off its wine unit Treasury Wine Estates Ltd to focus on the beer business. Pollaers is concentrating on stemming market-share losses and cutting production costs to free up cash and boost promotion of brands. He’s also developing new brews to win back consumers who switched to sweeter pre-mixed drinks and craft beers.
The size of Foster’s portfolio of beer brands likely won’t increase, Pollaers told ABC.
“Some brands will go stronger and some brands we will be replacing with new brands as we create them,” he said.
The brewer isn’t seeking to expand overseas through acquisitions, Pollaers said.
