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Delhi Wine Club

Posted: Wednesday, 08 September 2010 17:10

Foster Rejects Offer, Pernod denies Sale

If you are an Indian billionaire bored with the existing line of business and want to make a fortune in a new stream, you could consider investing in an Australian wine business appropriate for your stature, costing around Rs.120 billion since the cheaper option of buying  Pernod Ricard’s wine division is not available as the company CFO denies it’s on the market.

Foster's Group, known in India as a brewing company and which is actually
Australia's largest brewer has apparently rejected an offer of around $2.5 billion for its wine business as too low .

As written in delWine earlier, the second-largest wine company on the planet posted billions of dollars in write-offs. It is now being split from the beer business, the complete spin off taking place in 2011from the more lucrative beer business. However, this has sparked speculation that the $11 billion group may actually bring the sale forward.

"This 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," said Tom Elliott, managing director of a hedge fund according to a report by Reuter USA..

Investors have so far been focusing on potential buyers for the beer business, which enjoys some of the highest profit margins in the brewing world. SABMiller and  Asahi have been known to have been attracted to the company’s beer business worth more than $10 billion, but no firm bids have been reportedly made.

The suffering which owns wineries from Napa to Hunter Valley near Sydney has been always perceived to get a step-motherly treatment from the beer giant. The sale of wines including Beringer, Penfolds and Wolf Blass have been hit by the recession in the US and other parts of the world as well as the trend to keep away from low-end, bulk wines in Australia. The stronger Australian dollar has also been a problem with the domestic value of U.S. profits decreasing.

Interestingly whereas the beer and spirits producers are globally shying away from the wine business now seen as a specialized business (the word passion might be a passé), India’s leading brewer Mallya is gradually increasing his wine portfolio and might well be considering buying the Foster’s wine business (though he will have to outstretch a lot), as the lucrative beer business at around $10 billion may be a bit too much for him-especially with the current cash crunch.

Pernod Ricard’s wine business maybe more up his ally as he already owns a French wine business, Bouvet Ladubay, but the French liquor and wine company denied it was considering the sale of its wine division, according to a statement made by its CFO, Gilles Bogaert in London on Tuesday at a press conference, where he said the company was very happy with the wine business and that the wine business was not for sale.

Earlier this year, the Chivas whisky and Absolut vodka maker had put its struggling wine portfolio that includes the ubiquitous Jacobs Creek and Graffigna into a standalone division. Champagne is not included in the wine division though. Bogaert has not ruled out one-off strategic disposals.

Therefore, you might like to wait a while. After all despite your billions, this might be the most strategic decision you might nbe taking-stepping into a business where the adage is that you need a big fortune to make a small fortune.


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