Foster's Names Johnston CEO Amid Wine-Unit Review
Foster's Group Ltd., Australia's biggest beer and winemaker, named former Cadbury Plc executive Ian Johnston as chief executive officer as it considers the future of its global wine unit.
The appointment is effective immediately, Melbourne-based Foster's said in a statement today. Johnston, appointed to the board 12 months ago, has been acting CEO since July after the departure of Trevor O'Hoy.
Johnston takes charge as his Chairman David Crawford continues a review of the wine business, the world's largest behind Constellation Brands Inc., which cost A$6.8 billion ($5.7 billion) and 10 years to create. The appointment comes a day after Deutsche Bank AG disclosed a 5.3 percent stake in Foster's, amid speculation the Australia company may be acquired.
``It's quite a challenge to take on Foster's at this point in time,'' said Theo Maas, who helps manage $5 billion of equities at Fortis Investment Partners in Sydney, including beverage stocks. ``He hasn't been involved in acquiring the wine assets which makes it a lot easier to make a decision on whether to demerge or sell them.''
Foster's shares rose 5.8 percent, to A$5.66 at the close of trading in Sydney, valuing the company at A$10.9 billion. The stock has gained 22 percent since Johnston took the interim role on July 21.
Valuation Boost
The gain has increased Foster's valuation to 15 times estimated earnings, compared with a ratio of 17 for second-ranked Lion Nathan Ltd., according to data compiled by Bloomberg.
Johnston, 61, retired as Cadbury's head of global confectionary in 2000 after 20 years at the London-based company, the world's biggest chocolate maker. Before that he had a 13-year career with Unilever Plc, the world's second-largest consumer products maker.
``Ian has had an opportunity to get across the business during his time as acting CEO and will hit the ground running,'' Crawford said in the statement. ``Ian's mix of skills and experience, combined with the positive impact he has made over the past few months, convinced the board that he was ideal for the role.''
Deutsche Holding
Deutsche Bank last night revealed it owns more than 100 million shares, worth A$107 million using today's closing share price. The stake would make Deutsche the third-largest investor in Foster's, according to data compiled by Bloomberg.
Analysts said larger rivals SABMiller Plc and Heineken NV would be the most likely suitors for Foster's. InBev NV's agreement in July to buy Anheuser Busch Cos. for $52 billion has triggered speculation about further takeovers.
``The two most interested parties would be SABMiller and Heineken,'' said Bruce Davidson, an analyst at Blue Oar Plc in London. Foster's ``has global recognition, so in principle I'd say it's a very attractive asset in the beer industry,'' he said.
Heineken spokeswoman Veronique Schyns and SABMiller spokesman Nigel Fairbrass both declined to comment.
Deutsche Bank didn't say whether the stake was purchased on behalf of a client. Troy Hey, a spokesman for Foster's, and Kate Abrahams, a Sydney-based spokeswoman for Deutsche, both declined to comment on the stake. Under Australian market rules, shareholders must disclose stakes when they surpass 5 percent.
Wine Expansion
SABMiller has an Australian beer joint venture with Coca- Cola Amatil ltd., the nation's biggest soft-drink maker. Amatil CEO Terry Davis is a former head of the Foster's wine unit.
Foster's last month posted its first loss in 16 years after writing down the value of unsold stock, vineyards and brands. Crawford, who said the company paid ``too much'' for its assets, expects top complete the review this year.
Foster's embarked on its wine expansion in 1996 as it sought to limit the impact of stalling beer sales by paying A$482 million for Mildara Blass Ltd. In 2000, it moved into California with the A$2 billion purchase of Beringer Wine Estates Holdings Inc.
It paid A$3.2 billion for Southcorp Ltd. in 2005, betting that a combination of the maker of Lindemans, Rosemount and Penfolds with Foster's assets would give it global leadership in bottled wine.
Earnings at the wine business have slumped amid increased competition and gains in the Australian dollar that cut the value of sales outside Australia, where Foster's gets a third of revenue.