SPECULATION increased yesterday that the Fosters brewing group is
close to a decision on whether it will sell its Courage subsidiary in
the UK to Scottish & Newcastle or else float it off as a wholly separate
company.
That was after Fosters chief executive Ted Kunkel said in Melbourne
that the Australian parent acknowledged that something had to be done
and that it had to get a resolution to its in-going involvement in the
UK. He added that he had nothing to say at present but Fosters knew the
market extremely well and also the strategic options.
However, nothing will be done until the Office of Fair Trading
completes its newly started investigation into the pricing differentials
between supplies to tenants and the free trade of up to #100 a barrel.
That should take no more than three months.
Courage increased net profits last year by 17% to A$118m (#56m) but
by24% in sterling terms.
It has increased market share with volumes rising by 2.4%.
Overall, Fosters' net profits after tax fell 3% to A$203m in the six
months to December. Courage is one of the most aggressive players in
both the free trade and the supermarket off-licence sectors. Its
supplying of pub companies is one of its major growth points.
It has a market share of about 18% compared with S&N's 13%. Scottish
and Newcastle has a target of an overall UK penetration of 20%. The
Edinburgh-based company would be prevented by the Monopolies and Mergers
Commission from buying the whole of Courage.
However, there has been persistent talk that either Whitbread and
possibly Allied Domecq could take a proportion of the Courage operations
to leave three companies with a market share of about 20% and strong
enough to fight Bass at 23%.
Paradoxically this is the reverse of the position when Fosters as part
of Elders tried to buy S&N but was seen off by the MMC.
A flotation is complicated by the complex relationship with Grand
Metropolitan on the joint ownership of the Inntrepreneur Estates chain
of 6000 pubs. There is the issue of how many of these will become untied
from Courage as the supplier in the event of a sale.
But anything between 2500 and 4500 may be freed which would depress
brewers margins as pub owners could buy where they wished and also give
further opportunities to the pub companies. Overall, the industry would
prefer a break-up of Courage. S&N would benefit from taking over some of
Courage's assets by having a much greater exposure to the south of
England.
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