July 4 (Bloomberg) -- Foster’s Group Ltd. Chief Executive John Pollaers said the company is focusing on its business rather than talking to SABMiller Plc after rejecting a A$9.5 billion ($10.2 billion) takeover bid from the maker of Peroni and Grolsch.
The Melbourne-based company is concentrating on improving growth amid a tough retail environment in Australia, Pollaers said in a television interview aired on Australian Broadcasting Corp. yesterday.
“Our focus is let SABMiller do what they need to do, our focus is on this business,” Pollaers said. “The best way to maximize value is to have a well-run company that is unlocking the growth potential and that is relevant to consumers.”
Foster’s shares closed 5.9 percent above the A$4.90 a share offer on July 1 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 while still controlling about half of the country’s beer market.
London-based SABMiller, the world’s second-largest brewer by volume, said June 21 it would “seek engagement” after Foster’s rejected the cash offer as too low.
Australian retail sales advanced 1.3 percent in the 12 months ending June 30, the worst fiscal-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.”
Buying a business that already has among the highest margins of all the major brewers means it may be difficult for 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 percent 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. Bright Food Group Co., Shanghai’s biggest food and dairy producer, is considering making an offer for Treasury Wine Estates, two people familiar with the matter said July 1.
Pollaers is concentrating on stemming beer 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.
--Editors: Paul Tighe, Jim McDonald
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