Foster’s Demerger Edges Closer
By Andrew Starke
Foster’s Group chairman David Crawford has indicated to shareholders that a demerger of the company’s beer and wine businesses is closer than ever although no final decision has been reached.
In a letter to shareholders, Crawford responded to a number of issues raised at the company’s Annual General Meeting (AGM) in late October.
“Management and the Board, supported by expert advisers, have been assessing the financial, corporate and logistical considerations and associated costs and benefits of a demerger,” he wrote.
“When the Board completed the Wine Strategic Review in early 2009, we were clear that swift actions were required. A number of initiatives were identified which would improve operational performance in the short to medium term.
They included rationalising our vineyard and wine brand portfolio, appointing new operational leadership, separating our wine and beer sales force, marketing and supply functions, and pursuing a company wide cost reduction and efficiency program.
“At that time we considered alternative capital structures and ownership options for the wine business, but given the economic climate at the time and the related impact on capital markets, the immediate priority was to improve performance.
“By concentrating on performance improvement we are now in a position where the transformation agenda is largely complete.
“As we tracked the improving performance and watched the recovery in capital markets, we announced in May our intention to consider a demerger proposal.
“The proposal recognises that while our beer and wine businesses are market leaders, they operate in separate market segments with different strategic and operating characteristics.
“The Board believes there are potential shareholder benefits of a demerger including increased transparency; greater investment choice; and improved strategy and capital flexibility for separated beer and wine businesses.
“The work so far has given the Board comfort that the underlying assumptions are robust,” Crawford wrote.