Rational of Takeover Foster's Group

Rational of take over:

• The combination of foster’s and southcorp will transfrom the global wine industry and significantly enhave australia’s dcompetitive position on the global stage.

• Can position foster’s at the forefront of the global premium wine industry, providing premium australian wine to customers and consumers in australia us and uk, with A$2.6 bn

• Recent years southcorp’s poor performance and tumbling in share price, cheap to buy and it might be too late to buy if others buy first

• After the divestiture program of southcorp, their fund raising is problematice and expensive, fosters can help to solve the problem by its internal cash cows

• $500m investment in Grape growing capacity and winemaking facilities

• A good parent or not, depends on, whether fosters can combine two companies culture, and can best realise southcorp’s value.

• Foster see growth in market, and want to enlarge its capacity of winemaking and capture the trend

Fosters:

• Advantages: technological, brand building adn distribution capabilities and economies of scale----market approach

• Southcorp transform from production driven to market driven, but fall into price reduction pushed by major retailers, brand image impaired. As a result, sale and profit reduced.

• Disadvantage:inability to achieve higher returns from the traditional wine business, at least in short term, was the reason to diversify into wine clubs and wine service business. But those business have limited opportunities to grow in the highly concentrated domestic market.

• Images, vision, goals: mildara blass’s international strategy is to develop premium brands, improving margins, delivering capital efficiency and gaining better access to distribution,. Foster’s meanagement want to be wine trade wine clubs and wine services leader.

• Competition factors in wine industry: differentiation of the product offering and access to distribution.