Fosters Group Ltd, Australias largest brewer, announced today that it will divest its interests in wine, and will spin off the worlds second largest wine business after it’s first half earning dropped 12%. Fosters will attempt to revive beer earnings after the proposal is complete.
The arrangement will see shareholders receive 1 share of the new Treasury Wine Estates, for every three Fosters shares they own, if the proposal is voted in, in April.
Fosters Wine Division has been hit by the wine glut, a strong Australian dollar, and competition, and seen write-downs of around $2.5 billion in the past few years.
Fosters, who own the famous Victoria Bitter brand and Foster lager, saw domestic earnings drop 6.8 percent decline in earnings before interest and taxes to A$453.1 million after cooler summer weather damped demand.
The company follows in the footsteps of other large wine brands and brewers who have seen earning diminish and divestment in the wine industry. Interestingly, wine earnings increased in the first half, with Australia and New Zealand up 7%, and North and South America up 24%.
Fosters shares were trading at $5.64 earlier today, down around 1.6%.