Foster's finds alternative entry into wine industry

By Michele Simpson

Friday 19th May 2000

UNCORKED: Foster's wine buy

Australian brewing giant Foster's has popped the cork in a new local wine deal after bowing out to Lion Nathan in the race to grab a shareholding in Montana.

Foster's has moved into New Zealand's wine industry via another route - a large brewery and winemaking supply business.

In April a Foster's-owned shelf company, EFG Services, applied to the Commerce Commission to buy Carter & Associates - an Auckland-based business which is the major supplier of corks to the country's wine makers. The firm also distributes yeast and chemicals for wine making as well as corks for sparkling wine, glass bottles and oak barrels. EFG Services is now listed as Carter & Associates (2000) Ltd.

The sale occurred at the end of March, indicating Foster's strong interest in the fast-growing wine industry.

The brewer, long-tipped as a suitor for Montana, did not pursue a takeover of the wine maker. Instead, rival Lion Nathan this week bought 19.9% of Montana for $2.30 a share - a $98 million purchase. It was a move by Lion's investor relations manager Warwick Bryan acknowledged as a strategic ploy to block Foster's from the New Zealand wine market. Foster's already has a growing venture through Carlton & United in New Zealand and its Carlton Stripe beer - launched here in 1998.

Wine analysts said now Lion Nathan had shut Foster's out of buying a stake in Montana there were not a lot of other wine interests the Australia brewer could buy into except DB's Corbans.

DB Group has announced it is looking for a buyer in the second half of this year to buy its Corbans wine business outright. DB's original intent had been to find a strategic partner for Corbans but, following advice from Salomon Smith Barney, it has opted for a sale.

"Corbans is suffering from underinvestment," one analyst said. But it might be on the radar for Foster's as an investment opportunity, "although Corbans is much smaller than Montana and at a much earlier stage of development."

DB Group yesterday announced a first-half net profit of $15.23 million.

Carlton & United's spokesman for New Zealand, Paul Kennedy, was unavailable for comment.

Meanwhile, Lion Nathan held its special shareholders' meeting yesterday where a resolution was passed allowing the company to move across the Tasman.

Lion Nathan chairman Douglas Myers assured shareholders they would not be disadvantaged from the shift and primary listing on the Australian Stock Exchange.

"In total the board will increase future dividends by more than 20%, which is significant and indicates the degree of confidence my colleagues and I hold for the future of the company."

He said he would not be moving to Australia as a result of the Lion Nathan head office shift.

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