Foster’s Uncorks Plan to Buy Beringer for $1.5 Billion

Signaling the start of what could be major consolidation in the premium-wine business, Australia’s largest brewer, Melbourne-based Foster’s Brewing Group Ltd., has agreed to buy Beringer Wine Estates Holdings Inc. of Napa, Calif., for $1.5 billion in cash and the assumption of debt.

It would be the largest marriage, so far, in California’s rapidly growing wine industry, which, faced with static domestic consumption and a swelling supply of grapes, is seeking to tap new international markets. The combined sales of both companies’ wine units totaled about $850 million last year.

The union of a popular international brewer with one of this country’s largest premium winemakers should allow both to gain access to new global markets, analysts say.

“This will enable Foster’s to get their wine brands in the U.S. via Beringer’s strong relationships with U.S. retailers,” said Skip Carpenter, an analyst at Donaldson, Lufkin & Jenrette Inc. “And it will help Beringer outside the U.S.”

“One thing we were looking at very hard was how we would penetrate the international market,” said Walt Klenz, Beringer’s chief executive. “Partnering with someone who has a well-established [global] distribution system gives us a head start.”

The announcement ends weeks of speculation about the company’s merger plans. Beringer had been in discussions with Kendall-Jackson Wine Estates, another of the country’s largest premium wine companies, before agreeing to an acquisition by Foster’s.

Beringer, which is traded on Nasdaq, had watched its shares stagnate for most of the last year, despite increasing profitability. The problem, Klenz said, is that it just wasn’t large enough to catch the fancy of investors.

Shares of Beringer rose $1.56 Monday to close at $45.06 in Nasdaq trading.

Under the terms of the deal, Foster’s would pay $55.75 a share and assume about $380 million in debt. The deal has been approved by both companies’ boards and is expected to close in the next month.

Foster’s wine unit, Mildara Blass, produces some of Australia’s top-selling brands, including Wolf Blass, Black Opal, Greg Norman Estates and Yellowglen.

Beringer, which posted $438 million in sales in its last fiscal year, produces such brands as Meridian, Stags’ Leap, Chateau St. Jean and Chateau Souverain. Its less expensive Beringer White Zinfandel is the best-selling single wine in supermarkets, according to data from Gomberg, Fredrikson & Associates. However, the most rapid growth in sales has come in its Founders’ Estate and Meridian labels, in the same $7-to-$15 price range of Foster’s wines such as Black Opal.

In February, Foster’s said it would make two separate wine investments in the U.S. and Europe. It acquired a 25% stake in Sydney-based online retailer Wine Planet Holdings Ltd. It also bought 100% of closely held Windsor Vineyards, the No. 2 direct wine marketer in the U.S., which sells inexpensive wine with personalized labels to individuals and corporations.

In July, Foster’s also agreed to buy a 51% stake in French wine bottling company Sobemab for $11.4 million.

Other large mergers or acquisitions are likely to follow, wine analysts say, as companies seek greater marketing clout and greater access to capital.

Separately, R.H. Phillips Inc., which makes EXP, Toasted Head and Kempton Clark Wines, said it had agreed to be purchased by Canada’s largest wine maker, Vincor International, for about $92 million in cash and assumed debt, as Vincor seeks broader distribution for its brands in the U.S.

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Bloomberg News contributed to this report.