By Ian Neubauer
The Foster’s Group has lost $3 billion in its failed foray into the wine business, according to recent broker evaluations.
Foster’s paid $2.9 billion for Californian winemaker Beringer in 2000 and $3.7 billion for local group Southcorp in 2005. Adjusted for inflation, the combined investment represents $7.5 billion in today’s dollars.
However, analysts Merrill Lynch and Maquarie Equities released new figures yesterday valuing Foster’s wine business at about $4.5 billion, The Sydney Morning Herald reported.
The re-evaluation follow Tuesday’s announcement by Foster’s Board that the company had made a mistake investing heavily in wine and was planning a strategic review that includes the replacement of CEO Trevor O’Hoy.
Analysts have warned the search for a buyer for the wine business will prove difficult at any price because of challenging industry conditions and external factors.
These include continuing drought, the soaring Australian dollar, increased competition from South Africa and Chile, and the fact that a number of potential buyers are entering a period of devestment. Leading US winemaker Constellation Brands this week announced it expects a $24.5 million loss following the sale of $222 million in wine assets.
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