Foster's investors to vote on splitting bear and wine divisions

SHAREHOLDERS in liquor giant Foster's are expected to approve a split of the company's beer and wine divisions this week, in a move that will pave the way for one or both businesses to be acquired by larger global players.

A scheme of arrangement to effect the demerger will be put to a shareholder vote at a meeting to be held in Melbourne on Friday, and requires the support of at least 50 per cent of shareholders by number, with at least 75 per cent of the company's stock.

The deal is widely expected to pass, having been unanimously recommended by the Foster's board and attracting no criticism from shareholders at the company's annual general meeting in October, five months after the demerger plan had been confirmed.

The only issues likely to provoke criticism at the meeting are the costs of executing the deal -- $151 million, according to the scheme of arrangement documentation -- and the payout to departing chief executive Ian Johnston, who stands to pick up $10m in cash and shares when he leaves the company in July.

The demerger will result in Foster's wine division, Treasury Wine Estates, being spun off into a separate listed company with annual revenue of $1.9 billion.

The existing Foster's company structure will retain the beer, cider and spirits businesses, with annual revenue of $2.4bn.

Both companies are expected to be targets of takeover offers within months of separation. US private equity investor Cerberus made an unsuccessful approach for TWE at a price between $2.3bn and $2.7bn.

The beer division, which UBS has said boasts an earnings margin more than double the average of 17 per cent for brewers globally, has also been mooted as a possible takeover target for booze giants including Heineken, Asahi and SABMiller.

Foster's combination of beer and wine has generally been considered a "poison pill" to keep potential buyers from making a move. If the demerger is approved, the scheme will be submitted for Federal Court approval on May 4. If court approval is granted, the split will be effected on May 9, with Treasury Wine Estates scrip to begin trading on the ASX the following day.