Foster's has not received direct Molson/Modelo bid: Sources

Australia's Foster's Group Ltd has not received a direct takeover approach from Molson Coors Brewing Co or Mexico's Grupo Modelo SAB, two sources familiar with the situation said on Friday.

The sources did not dismiss reports that Molson and Grupo Modelo may be considering a joint bid, but said nothing had been directly tabled with the Australian brewer.

Banks including Bank of America Corp and Deutsche Bank AG are helping the maker of Corona beer and the maker of Coors Light beer to come up with financing for a possible offer, said the source, who declined to be named because the talks are not public.

But a bid looks less likely than it did a few weeks ago because of concerns about the structure of the deal, according to Bloomberg, which first reported the news.

"A deal with this structure just doesn't feel right," said Morningstar analyst Philip Gorham. "I can see why Molson Coors is interested, but I don't believe the structure of the deal as it's been rumored really works."

Foster's, Australia's top beer maker with brands including VB and Cascade, has a market capitalization of A$8.31 billion (USD 8.81 billion), according to Thomson Reuters data. Gorham said he could see a deal being worth about USD 9 billion, which he guessed would be too much for Molson to swallow alone.

In late 2008, Molson emerged as a holder of a 5% stake in Foster's, leading to speculation that it could be a likely suitor once the company spun off its troubled wine unit. Molson has since unwound the position at a profit.

Foster's spun off the wine business, now called Treasury Wine Estates Ltd, last month.

After the split, the market valued Foster's and Treasury more than they had Foster's before the separation, suggesting that a takeover premium was being baked in to the shares.

Furthermore, analysts have warned that the soaring Aussie dollar could scare off potential bidders, whom they said could include Japan's Asahi Breweries Ltd, Coca-Cola Amatil Ltd and SABMiller PLC.

Foster's, Modelo, Molson, SAB, AB InBev and Deutsche declined to comment. Coke Amatil, Asahi, and Bank of America were not immediately available.

Curious bedfellows

For Molson Coors, which has a joint venture in the United States with SABMiller, teaming up with Modelo would "make life complicated," said Morningstar's Gorham, since the Mexican brewer is half-owned by Anheuser-Busch InBev SA.

"Molson would be torn between two large, influential players," he said. Still, he said the timing made sense for Molson, as it is nearly done wringing out savings from the MillerCoors venture, and Foster's dominance in Australia fits with Molson's business, which is concentrated in the United States, Canada and Britain.

Even though Modelo does not have experience with overseas acquisitions, it has many international partnerships through which it sells its Corona and Negra Modelo beers around the world. It works with Molson in Canada and Foster's in Australia.

Molson, which has been under pressure by Wall Street to spend some of its cash pile, also lacks a strong track record of international deal-making.

"Because of the nature of consolidation, you've got people that get into bed with each other whom you might not expect," said Tom Pirko, founder of consulting firm Bevmark LLC.

Pirko said it would be interesting to see if AB InBev moves to block any such deal by Modelo, since it is widely believed throughout the industry that AB InBev would like to buy Modelo outright, and its buying a stake in Foster's would make it more expensive.

"It looks like you block it so you can get Modelo," said Pirko. "But in point of fact, if you want to continue to be the biggest brewer in the world, maybe the logical step is to allow Modelo to go forward and then swallow Modelo and Foster's.

Foster's shares closed on Thursday at A$4.28 in Australia. Its American Depositary Receipts were up 5.5% at USD 4.80 on the Pink Sheets. Molson shares fell 3.1% to close at USD 44.36 on the New York Stock Exchange.