MELBOURNE, Feb 17 (Reuters) - Foster's Group Ltd, Australia's largest brewer, plans to retain its struggling wine business and reshape it over time, as tough debt and equity markets cut out the option of a sale or demerger.
Foster's, which makes Beringer, Penfolds and Lindemans wines, announced a review of the wine unit in June last year. The unit is valued at up to A$5 billion ($3.24 billion) and has been a drag on overall earnings because of writedowns.
'The current difficult conditions in debt and equity markets mean this is not the appropriate time to sell or demerge Foster's wine business,' said Chairman David Crawford in a statement on Tuesday.
Speculation had been rife that international brewers were waiting in the wings, ready to pounce on the group if the reliable earnings from its beer business were unhitched from wine, but few expect a takeover with wine remaining in place.
North America's Molson Brewing Co last year took a five percent interest in Foster's.
Foster's, which also reported a 3.2 percent rise in first half net profit to A$411.3 million, said write-downs and restructuring charges of A$330 million to A$415 million in the second half of the year as a result of the review.
The group said it expected to reap over A$100 million in cost savings in the 2011 financial year.
Foster's plans to structurally separate the wine and beer businesses as part of its plan to fix the poor operational performance.
'The review has identified that poor execution and an ineffective organisational structure and culture have adversely impacted operating performance,' Chief Executive Ian Johnston said in a statement.
The group will also sell 36 vineyards and three wineries will either be closed of reconfigured in Australia and California.
(Reporting by Simone Giuliani) Keywords: FOSTERS/ (melbourne.newsroom@reuters.com; +613-9286-1421) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Foster's, which makes Beringer, Penfolds and Lindemans wines, announced a review of the wine unit in June last year. The unit is valued at up to A$5 billion ($3.24 billion) and has been a drag on overall earnings because of writedowns.
'The current difficult conditions in debt and equity markets mean this is not the appropriate time to sell or demerge Foster's wine business,' said Chairman David Crawford in a statement on Tuesday.
Speculation had been rife that international brewers were waiting in the wings, ready to pounce on the group if the reliable earnings from its beer business were unhitched from wine, but few expect a takeover with wine remaining in place.
North America's Molson Brewing Co last year took a five percent interest in Foster's.
Foster's, which also reported a 3.2 percent rise in first half net profit to A$411.3 million, said write-downs and restructuring charges of A$330 million to A$415 million in the second half of the year as a result of the review.
The group said it expected to reap over A$100 million in cost savings in the 2011 financial year.
Foster's plans to structurally separate the wine and beer businesses as part of its plan to fix the poor operational performance.
'The review has identified that poor execution and an ineffective organisational structure and culture have adversely impacted operating performance,' Chief Executive Ian Johnston said in a statement.
The group will also sell 36 vineyards and three wineries will either be closed of reconfigured in Australia and California.
(Reporting by Simone Giuliani) Keywords: FOSTERS/ (melbourne.newsroom@reuters.com; +613-9286-1421) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.