Business Case Studies, Mergers, Acquisitions and Takeovers Case Study, Foster's Takeover of Southcorp, Strategic Fit or an Overpaid Deal?

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Mergers, Acquisitions and Takeovers Case Study

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Case Title:

Foster's Takeover of Southcorp : Strategic Fit or an Overpaid Deal?

Publication Year : 2005

Authors: Rohit Kumar, Srinath Manda

Industry: Beverages

Region:Australia

Case Code: MAA0039

Teaching Note: Not Available

Structured Assignment: Not Available

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Abstract:
In January 2005, Foster's, a leading Australian beer company, announced the takeover bid of Southcorp, Australia's largest wine manufacturer, to enhance its foothold in the global wine industry, which is going through a phase of consolidation. In order to lure Southcorp shareholders to accept the offer, Foster's had to revise its initial bid of $4.17 to $4.26 per share. The deal, which some analysts felt was overpaid, was completed in late May 2005. The analysts argued that the price paid for the takeover overshadowed the benefits of the merger. However, Trevor O'Hoy, President and Chief Executive Officer of Foster's, maintained that he has not overpaid for the deal and apart from the synergy benefits of the merged entity, they would be able to deliver a superior customer service and a better portfolio to the customers.

Pedagogical Objectives:

  • To highlight why Foster's thought it would be lucrative to invest heavily into the wine segment
  • To discuss the company's strategies to become the world's largest wine maker in 2005.

Keywords : Consolidation of global wine industry;Mergers,Acquisitions,Alliances Case Study; Global beer market; Australian wine industry; World’s largest wine maker; Reduction in profit margins of Foster’s; Foster’s growth through acquisitions; Cannibalisation of wine brands; Cost savings through synergies; Mildara Blass; Penfolds; Rosemount; Foster’s lager

Contents : 
Foster’s: The Company Profile
Southcorp: The Company Profile
Foster’s Takeover of Southcorp: Strategic Fit or Overpaid Deal?
Acquisitions of Foster’s
Business Wise Sales of Fosters
Consolidation of Global Wine Industry
Brands of Foster’s and Southcorp
Ten Largest Shareholders of Foster’s

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