By Andrew Starke
Shareholders in the Foster’s Group have responded to takeover speculation and the rebranding of the company’s wine division by propelling its share price to a 20-month high.
Foster’s share prices reached $5.97 on Friday (Jul 23), the highest level since November 2008 and well up from late May when its share price briefly fell below $5.20 just prior to the demerger announcement.
While analysts believe the brewer remains undervalued and could trade as high at $6.50, it appears unlikely that a suitor will make a serious bid for either Foster’s beer or wine business before the official demerger is announced.
No such announcement is expected before the first half of 2011 at the earliest.
Any acquisition completed before a formal separation would create a capital gains tax liability for shareholders, while factors such as the strong Australian dollar and weak growth in the local beer market make Foster’s a less attractive target for offshore companies.
Foster’s also moved to clarify media reports of its earnings targets.
“Foster's Group Limited (Foster’s) notes media reports of an internal earnings target of $84 million for its Australia and New Zealand wine business,” it said in a statement to the Australian Stock Exchange (ASX).
“The number represents an internal management EBIT target for the Australia and
New Zealand wine business for the 2011 financial year presented to an internal sales conference. Foster's will provide a detailed update on group financial performance with the release of its financial results for the 12 months ended 30 June 2010 on August 24.”
Foster’s shares were trading at $5.83 at midday today (Jul 26).