Foster's is particularly proud of the gold star it received yesterday for good governance. There is no black letter law on whether any listed company must notify the market of an unsolicited offer for a major business.
Certainly, in keeping with the spirit of good disclosure practices, companies should let shareholders know about such things.
Having said this, it is fortuitous for Foster's that its open and informative stance coincided with its desire to let the investment community know that at least one party is interested in buying its underperforming wine business.
As far as we know Foster's has not officially put the wine business up for sale. But it's fair to say that an acceptable offer at any time over the past few years would have been warmly welcomed.
The fact that Foster's is now working towards the demerger of the wine and beer businesses is evidence that no one has been particularly interested in buying the wine business until now. However, there has been plenty of talk over the past few years about a takeover for the entire group - but nothing has eventuated and Foster's has always denied that it had received any genuine bites.
Similarly, there is regular speculation about offers for the beer business. Again, Foster's has denied any real offers have been presented to the board.
But the board would have been thrilled that the first time it needed to let the market know about a suitor was for the wine business - which is seen as an anchor weighing on the company's overall value.
It almost didn't matter that the private equity firm sniffing around the wine arm was offering much less than Foster's would accept. And Foster's is not being cute about this. The $2.3 billion to $2.7 billion is not a price in the ball park.
The company (and its auditors) have just signed off on accounts that value the wine unit at $3.1 billion. There is no way Foster's could sell it for $2.7 billion, let alone for
$2.3 billion at the bottom end of the range.
Analysts have ascribed a range of values to the wine business, and a few fall within the range being offered by the suitor, but many put its worth at more than $3 billion.
The variance in range of the offer was because it was subject to due diligence. But the offer was sufficiently inadequate in the eyes of the Fosters' board (or sufficiently shy of book value) that the interested party was not given the opportunity to take a look at the books.
The private equity firm's expression of interest has given the Foster's board a boost. At the very least it has provided a floor value for the wine division once it lists on the Australian Stock Exchange.
Sure, Foster's believes there has been improvement in the division's prospects over the past year. But there have been plenty of false dawns.
In August, Foster's reported a net loss of $464 million for 2010 financial year, compared to a net profit of $438 million the previous year. The result included a non-cash impairment of $1.16 billion against the carrying value of the wine assets.
The division's earnings in 2010 were dealt a blow by the exchange rate, but even without this the performance was (while better) still disappointing.
Foster's move into wine, the subsequent weakness of the sector, and the division's history of bad management have all contributed to five years of woeful performance and resulted in several management scalps, including the previous chief executive, Trevor O'Hoy.
Last year Greg Dring from Macquarie starkly outlined the issue with the US wine business.
''First, management failed to visualise market opportunities for its wine brands. It failed to effectively respond to growing retailer sophistication, a mosaic of consumers and explosion in SKUs (eg, competition). As a result, the portfolio generated sub-market value growth.
''Second, Foster's was working with a premium cost structure to build out a commercial offer. Third, Foster's failed to capitalise on distributor relationships and drive off-premises growth … Whatever the reasons, Foster's Americas wine strategy has been a failure.''
Quite.
