SOUTHCORP PROPOSES FOSTER'S MERGER

Published: 23 July, 2008

By Jack Hibberd

The protracted and increasingly acrimonious Foster's/Southcorp takeover battle took a new twist this week, after Southcorp proposed a complicated merger agreement as an alternative to Foster's A$3.1 billion (A$4.17 a share) takeover bid. Southcorp developed the plan following the release of an independent report that valued its shares at A$4.57 to A$4.80, and their value to Foster's at up to $5.97 a share, a significant premium on the Foster's offer. In a statement, Southcorp chairman Brian Finn reiterated his intention to recommend that our shareholders reject the offer' but then added: As a constructive alternative to the current situation, we have developed a proposal that might provide a mutually beneficial solution for Foster's and Southcorp.' Under the terms of the new proposal, Southcorp would purchase Foster's wine arm and remain a stand-alone business - with Foster's owning a controlling share of up to 60%. The mechanics of the deal involve Southcorp issuing around 700 million shares for the acquisition of the Foster's wine arm. Southcorp would then buy back one in 10 shares at 4.70 cents a share - the midpoint of the independent valuation. Foster's immediately moved to dismiss the proposed deal and called the valuation of Southcorp's shares questionable'. A spokesman said that a merger proposal was rejected when the two companies were in talks at the start of the year. Southcorp's proposal only serves to endorse Foster's strong view that these two Australian companies should be combined to create the world's leading premium wine business,' he added. Foster's also pointed out that the new proposal massively undervalued Foster's wine arm and that if the same technique was applied to Southcorp it would result in a valuation of just A$3 a share. Earlier in the week Foster's extended the period for its hostile takeover by two weeks, until 31 March.

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