Fosters passes on an offer to buy its wine business

Foster’s wine business might not be the company's favorite child, but, they still think of her as having value.

The company is the largest alcoholic beverage maker in Australia, known more for beer than wine. They said recently that they planned to list its beer and wine operations separately so that they could each develop their own corporate strategies.

Foster's wine business, which includes  Beringer, Penfolds and Wolf Blass, is seen as a bit of an unwanted child in the Foster's portfolio. Estimates suggest Foster’s beer operations are worth about $10 billion, and its wine business is thought to be worth considerably less.

This apparently prompted an unsolicited bid for the brand's wine business. The New York Times is reporting that an unidentified private equity firm offered between 2.3 to 2.7 billion Australian dollars for the wine business, a deal Foster's quickly rejected. It seems Foster’s has put in about $6.4 billion into its wine business in recent years and thinks a 1/3 return on such an investment does not quench its thirst.

It is a dilemma for a brand which, according to Tom Elliott, managing director of hedge fund MM&E Capital "...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," 

Sources: The New York Times and Reuters

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