Analysts Mixed On Foster's Ceo; Musing About Deutsche Bank's 5.3% Stake

The Age

Tuesday September 30, 2008

Ari Sharp

THE appointment of new Foster's Group chief executive Ian Johnston has received a mixed response from equities analysts as speculation builds on the rationale for a 5.3% stake in the company that Deutsche Bank has taken.

Mr Johnston, a Foster's director who had been acting in the role since the departure of Trevor O'Hoy in July, was permanently appointed to the top job on Friday following a worldwide search. Some analysts have suggested that his appointment is not a long-term one, and is instead for the sole purpose of guiding the company through its current difficulties.

Mr Johnston had previously had long stints working at Unilever and Cadbury Schweppes, prompting Foster's to boast about his experience in the fast-moving consumer goods sector.

"While his experience is extensive, none of the positions served have been in the alcohol industry," said Macquarie equities analyst Andrew Kovacs in a note to clients.

"Appointing a permanent CEO is a step in the right direction (but) we still see no near-term fix to the deteriorating underlying business."

UBS analyst Lindy Newton was a little more upbeat, saying Mr Johnston had shown a good understanding of the business when he presented the company's full-year results last month, "offering an open ear to criticism about the company's performance".

"We think Foster's will find it easier to attract a longer-term CEO post-Ian Johnston once Foster's has decided on its strategic course and bedded down any potential corporate changes," she said.

Credit Suisse analyst Larry Gandler agreed, saying "we anticipate the CEO search will continue, albeit opportunistically".

The company said a highly anticipated report, considering the prospect of a demerger of the wine and beer businesses, would be delivered by the end of the year.

Although Deutsche Bank has refused to reveal who the beneficial owner of its stake is, speculation has arisen that it may be linked to acquisition activity.

Mr Kovacs suggested one candidate was Molson-Coors, the world's seventh-largest brewer, in a play that could involve several other parties.

Molson-Coors is already involved in a joint venture in the US with Miller, owned by SAB, while SABMiller is involved in Pacific Beverages, a joint venture with Coca-Cola Amatil in Australia.

Both Molson-Coors and SABMiller have had relationships with Deutsche Bank in previous transactions.

Last week JPMorgan analyst Stuart Jackson suggested Pacific Beverages would be well-placed to take over Foster's beer assets, and could either wait for a demerger or on-sell the wine assets. Mr Jackson suggested a takeover deal involving cash and CC Amatil scrip was likely.

The timing of Mr Johnston's appointment is not believed to be linked to the appearance of Deutsche Bank on the Foster's share register.

Foster's shares rose 1 to $5.67.

LINK

? www.fostersgroup.com