tag:theconversation.com,2011:/global/topics/fosters-732/articlesFosters – The Conversation2016-11-18T00:51:27Ztag:theconversation.com,2011:article/688222016-11-18T00:51:27Z2016-11-18T00:51:27Z‘The single biggest reform to child welfare’ is a re-run of decade-old promises<p>After ABC TV’s <a href="http://www.abc.net.au/4corners/stories/2016/11/14/4572365.htm">Four Corners</a> aired horrifying evidence of abuse and mismanagement in the out-of-home care system for foster children, New South Wales Premier Mike Baird announced what he <a href="http://www.smh.com.au/nsw/mike-baird-announces-reform-to-states-broken-child-welfare-system-20161117-gsrbb6.html">called</a> the “single biggest reform to child welfare in NSW”.</p>
<p>While I have no doubt Baird is trying to improve the lives of children, his “solution” is a re-run of failed promises made by the Carr government more than a decade ago.</p>
<h2>The NSW department failing to meet industry standards</h2>
<p>The <a href="https://www.pic.nsw.gov.au/RoyalCommission.aspx">Wood Royal Commission</a> into police corruption in the late 1990s exposed evidence that police and the child welfare sector were ignoring cases of paedophiles abusing children in out-of-home care. As a result, the NSW government introduced new standards that child welfare agencies were supposed to meet to prove they could properly care for children. This was known as “accreditation”. </p>
<p>The huge disaster here is that the biggest player in the sector – the NSW government’s own department in charge of child welfare, Family and Community Services – has never itself received accreditation. This was highlighted in a report released after the Four Corners program by the <a href="https://www.audit.nsw.gov.au/publications/latest-reports/volume-six-2016-facs">NSW Audit Office</a>, which also criticised the department’s inability to track what happens to children in care. </p>
<p>The fact that Family and Community Services has not achieved accreditation, after so many years, shows how deeply flawed the system is.</p>
<h2>A cause for action</h2>
<p>The Four Corners <a href="http://www.abc.net.au/4corners/stories/2016/11/14/4572365.htm">program</a> exposed the sexual abuse and wholesale neglect of children in residential care, leading authorities to order <a href="http://www.abc.net.au/news/2016-11-15/tasmanian-resi-care-service-runs-threadbare-operation-ex-worker/8024938?section=tas">safety checks</a> on young people under the care of agencies featured in the program.</p>
<p>Baird was forced to <a href="http://www.smh.com.au/nsw/mike-baird-announces-reform-to-states-broken-child-welfare-system-20161117-gsrbb6.html">admit</a> that the out-of-home care system:</p>
<blockquote>
<p>… is failing to improve long term outcomes for children and to arrest devastating cycles of intergenerational abuse and neglect. </p>
</blockquote>
<p>Appalled that 60% of homeless people have been in care, he <a href="http://www.smh.com.au/nsw/mike-baird-announces-reform-to-states-broken-child-welfare-system-20161117-gsrbb6.html">declared</a> the dismal prognosis facing the state’s children was: </p>
<blockquote>
<p>… not just a cause for concern but a cause for action.</p>
</blockquote>
<p>But actions, and dollars, only count if they’re directed at programs and reforms that work.</p>
<h2>A multi-billion-dollar industry</h2>
<p>Providing care to vulnerable people is a multi-billion-dollar industry. In NSW last year alone a <a href="https://www.audit.nsw.gov.au/ArticleDocuments/106/Media_Release_Volume_Six_2016_FACS_17_November_2016.pdf.aspx">reported</a> A$2.8 billion was directed to non-government agencies.</p>
<p>The announcement that further funds would be channelled into fixing the broken system is a response to a damning assessment by respected public servant David Tune. The review is yet to be released in full, but you can read a summary <a href="https://www.facs.nsw.gov.au/__data/assets/file/0005/387293/FACS_OOHC_Review_161116.pdf">here</a>.</p>
<p>The Tune report found that A$300 million per year is being spent on support programs without any evidence that they actually work. <a href="https://www.facs.nsw.gov.au/about_us/media_releases/kids-in-care-at-centre-of-reform">According</a> to the NSW government, this is now set to change, with new models of evidence based, individually targeted support packages to ensure that children and families will receive the help they need. </p>
<p>Children have been raped and have died while in the care of the state. The need for concrete action is very real and the commitment to reform is to be welcomed. But these children deserve more. The NSW government’s belief in its reform package should not be doubted, but what’s been announced appears unlikely to fix the problem.</p>
<p>In the late 1990s, the Carr government also pledged reform of the child welfare system. It launched a multi-million-dollar Families First program (later renamed <a href="http://www.community.nsw.gov.au/for-agencies-that-work-with-us/our-funding-programs/brighter-futures-program">Brighter Futures</a>). </p>
<p>This program, then-premier Bob Carr declared, would provide early intervention and assistance to at-risk families. It would involve comprehensive training for child welfare staff, systematic and usable data collection, and – most significantly of all – would be thoroughly evaluated. </p>
<p>Within five years, its own architects had <a href="http://www.smh.com.au/news/National/Millions-for-programs-but-results-are-sparse/2005/03/13/1110649059053.html">condemned</a> the <a href="http://www.smh.com.au/news/National/Falling-between-the-cracks/2005/03/11/1110417688464.html">program</a> for wasted money, confusing overlap and missed opportunities.</p>
<p>Carr was forced to head off mounting public concern about the outcomes for children in care by <a href="http://www.abc.net.au/pm/stories/s750270.htm">injecting a further A$1.2 billion</a> into the department just weeks before the 2003 state election. He replaced the minister and the child welfare department’s director-general at the same time. </p>
<p>Labor won the election, but just five years later the <a href="http://www.dpc.nsw.gov.au/__data/assets/pdf_file/0008/33794/Executive_Summary_and_Recommendations_-_Special_Commission_of_Inquiry_into_Child_Protection_Services_in_New_South_Wales.pdf">Wood Special Commission</a> into child protection once again highlighted the inability of the system to keep children safe.</p>
<h2>Can failed agencies reform themselves?</h2>
<p>The real challenge for Baird lies in how the out-of-home care agencies will implement his grand plan. Details are still sketchy, but there was no talk yesterday of starting over with new providers. It appears the reforms will be carried out by the same agencies that currently dominate the system. </p>
<p>In many instances, these are the same players that have shaped child welfare in NSW for the last 100 years. In many instances, they are the same agencies that have featured before the ongoing <a href="https://www.childabuseroyalcommission.gov.au/">Royal Commission into Institutional Responses to Child Sexual Abuse.</a></p>
<p>This is the crux of the problem. Historical funding models, long standing religious and charitable loyalties, a belief that agencies that provide care to children in turn care for children, and the sheer difficulty of simply beginning again, means the same agencies that have failed to live up to previous government agendas will be the ones expected to now usher in the newest “single biggest reform to child welfare”. </p>
<p>Care-leavers (people who were in care as children but are now adults) have been telling governments for decades that there is a problem. For example, John Murray <a href="http://www.aph.gov.au/%7E/media/wopapub/senate/senate/commttee/S7291_pdf.ashx">told</a> a Senate committee in 2004 that:</p>
<blockquote>
<p>… the social services on offer are generally run by the very organisations that failed us in the past … we should no longer have to suffer at the hands of rank amateurs.</p>
</blockquote>
<p>Will Baird be the premier to stop the intergenerational cycle of abuse and neglect of children in the care of the state by the very agencies entrusted to care for them? </p>
<p>If that’s the legacy he is striving for, he’ll have to do more than he’s promised so far.</p><img src="https://counter.theconversation.com/content/68822/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Kath McFarlane was Chief Investigator for a NSW Government-awarded tender to Charles Sturt University to examine bail practices in the Children’s Court, and has advised on the Family & Community Services Pathways of Care study. In 2015 she was Chief of Staff to the NSW Minister for Family and Community Services.</span></em></p>The NSW government’s latest promised solution to well-documented abuse in the out-of-home care system is, in fact, a re-run of promises made by the Carr government more than a decade ago.Katherine McFarlane, Senior Lecturer in Justice Studies, Charles Sturt UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/51382012-02-02T02:59:56Z2012-02-02T02:59:56ZNo place for jingoism in Woolies’ sell-off of Dick Smith<figure><img src="https://images.theconversation.com/files/7318/original/xs7vy2kf-1328139279.jpg?ixlib=rb-1.1.0&rect=7%2C90%2C974%2C638&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Dick Smith has been vocal about Woolworths selling his former electronics business - but his arguments don't stack up.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Entrepreneur Dick Smith has been <a href="http://www.heraldsun.com.au/business/up-to-100-dick-smith-stores-to-be-axed-as-part-of-woolworths-restructure/story-fn7j19iv-1226258151135">very vocal</a> in the past few days about the prospect of his namesake retail business falling into “foreign hands”. Despite him selling the electronics chain to Woolworths two decades ago, he has threatened to “trash the brand” if some foreign outfit tries to buy it.</p>
<p>The argument he is peddling is spurious at best. The principal issues appear to be that profits will be skimmed off to some distant land, national pride will be irrevocably dented, and some Aussie battlers will find themselves slaving away in the employ of absentee masters. </p>
<p>It is very unclear why he and the more alarmist chunks of the popular media place so much importance on the shifting national identifies of existing businesses. Similar handwringing occurred with regard to acquisition of <a href="http://internationalbs.wordpress.com/2011/09/22/bluing-about-brewing-will-sabmiller-bring-on-an-aussie-apocalypse/">Foster’s by SAB Miller</a>.</p>
<p>Perhaps it reflects Dick’s own background as a business owner - someone who derived their income from the “surplus” or profits of the firm - as he is fixated on that small part of the financial impact of business operations. But for almost all stakeholders in the firm, and the overall health of the economy, the question of the location of the major shareholders (and principal decision-makers) should be of little importance.</p>
<p>Consider the specifics of a sale of the Dick Smith Electronics concern by Woolworths. The division currently consists of 433 stores across Australia and NZ (we’ll get back to this Trans-Tasman dimension in a second), and made $1.8 billion in sales last year. </p>
<p>The economic and societal impact on Australia of these operations is most heavily felt in terms of employment provided and the firm’s transactions with a variety of parties up and down its supply chain.
The firm employees approximately 5000 staff, which likely corresponds to in excess of $250m in wages paid out per annum. That remuneration flows through the economy as spending, savings and taxation with all the typical multiplier effects. </p>
<p>So too Dick Smith Electronics pays money out to landlords, governments at various levels, to supply chain participants (local and foreign), and to other ancillary service providers. In fact on the $1.8b in sales last year (across the Australia and NZ operations), after all these outgoings, the “earnings” to owners of the firm (the residual “surplus” or “profit” extracted by Woolworths) were a paltry $20m or so.</p>
<p>That is the only part of this large economic “pie” really on the table for any foreign suitor. If Dick Smith Electronics were sold to a non-Australian entity, they would be buying the right to extract such profit, but also taking on the role of paying the wages bill, and maintain the income streams to the other parts of the Dick Smith sphere of activity. </p>
<p>The firm would still pay taxes, rents, and provide consumers with access to products. The firm might remit profits offshore, but it’s just as likely said profits would be reinvested in Australian in an attempt to improve the business and its performance. </p>
<p>This is hardly a case of “selling the farm”. Unlike acquisitions of some manufacturing or technology based firms, in retail there is very little scope for relocating key value-generating activities offshore. And unlike extractive industries or agriculture, resource scarcity is not really in play. Mr Smith has chosen one of the least impactful foreign investment scenarios to bemoan. </p>
<p>There is also one clearly irreconcilable contradiction in the position Smith takes on foreign ownership: how to view outward foreign direct investment.</p>
<p>If the logic says Aussie interests are hurt by inward investment (e.g. by acquisitions of local firms by big bad foreign folks), then surely any instance when an Australian firm expands offshore is similarly deleterious to the host nation. Why didn’t Dick Smith come out in defence of New Zealand’s citizenry when his namesake firm made their imperialistic entrance into New Zealand? How can we stand by and allow Westfield to buy up the shopping centres of distressed US property moguls? Where was the concern for Swedish audiologists when Cochlear stormed into Sweden and bought Entific back in 2005?</p>
<p>Perhaps Dick Smith sees our outward investment as more benevolent, or at least, in our national interest. That was the logic of mercantilist trade policy, and too often public debate on foreign ownership takes a similarly jingoistic and naïve position. We need to recognise that ownership only generates a residual right to profits. The all important economic activity that drives prosperity is pretty much blind to who is at the end of that pipeline. And typically we should be too. </p>
<p><em>A version of this article first appeared on Andre’s <a href="http://internationalbs.wordpress.com/">International BS</a> blog.</em></p><img src="https://counter.theconversation.com/content/5138/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andre Sammartino does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.</span></em></p>Entrepreneur Dick Smith has been very vocal in the past few days about the prospect of his namesake retail business falling into “foreign hands”. Despite him selling the electronics chain to Woolworths…Andre Sammartino, Senior Lecturer in International Business & Strategic Management, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/34992011-09-22T04:40:56Z2011-09-22T04:40:56ZFoster’s takeover: don’t expect beer drinkers to turn bitter<figure><img src="https://images.theconversation.com/files/3793/original/fostersglasses.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">People will continue to have a positive view of Foster's brands, regardless of who owns the company.</span> <span class="attribution"><span class="source">Nicolas.B</span></span></figcaption></figure><p>Foster’s Group’s <a href="http://www.businessspectator.com.au/bs.nsf/Article/Fosters-shares-jump-on-new-takeover-offer-LX5E9?OpenDocument&src=hp4">acceptance</a> of a $12.3 billion takeover bid from global brewer SABMiller will see the ownership of some of Australia’s most popular beer brands, such as Victoria Bitter and Cascade, fall into foreign hands.</p>
<p>The planned acquisition has provoked <a href="http://www.heraldsun.com.au/business/fosters-set-to-fall-into-hands-of-sab-miller-following-99b-deal/story-fn7j19iv-1226143018968">strong criticism</a> from anti-foreign ownership campaigners like Dick Smith, who bemoan the loss of Vegemite, Arnott’s, Aeroplane Jelly and other iconic brands to companies based overseas.</p>
<p>But is there any proof that consumers loyal to Foster’s will be put-off by the move? University of New South Wales marketing lecturer Dean Wilkie says SABMiller has little to worry about.</p>
<hr>
<h2>How damaging would a customer backlash be for Foster’s?</h2>
<p>When we form an attitude about a brand, it is the sum of the positive things we know about the brand, as well as the negative things.</p>
<p>If we know more positive things about a brand, then our attitude towards it will ultimately be positive.</p>
<p>People who drink Foster’s beers are likely to have a range of positive information, such as the taste of the beer, the experiences they have while drinking it, and the places where they buy it.</p>
<p>So when some negative information comes out, such as that Foster’s is going to be owned by a foreign company, it doesn’t have much of an impact because there is so much existing positive information about the brand.</p>
<p>But when it comes to people who don’t have a strong connection with the brand, a negative piece of information like this can cause a lot more damage.</p>
<p>Many people are saying that this takeover is potentially bad for Foster’s brand, but this isn’t true for people who consume their products regularly and have a strong connection.</p>
<p>The other reason for this is that consumers are becoming used to their favourite brands being bought up by companies from overseas.</p>
<p>We know that Holden is not really an Australian company, we know that Vegemite is foreign-owned – but we still buy their products because the realities of corporate ownership aren’t at the front of our minds.</p>
<p>Because we have become used to it, foreign ownership does not have as big an impact as it would have a few years ago.</p>
<h2>Do consumers care whether a product is produced in Australia, or is Australian-owned?</h2>
<p>In Foster’s case, there is not even very much of an Australia-wide connection – it’s more of a local connection. Think of Victoria Bitter and Melbourne Bitter, for example.</p>
<p>In essence, as long as they keep brand image the same, then it won’t suffer too much damage.</p>
<p>But if consumers learn that, for example, VB is now being made in China, or they start to tinker with the brand image, then Foster’s will be in trouble.</p>
<p>Take Qantas, which is one of Australia’s most iconic brands, and is planning to expand into Asia. Consumers are beginning to see that the plan could have an impact on Australian jobs, and this is having an impact on the image of the brand.</p>
<p>If SABMiller decides to cut the local workforce or shift some production overseas, then it can probably expect to have a bit of a backlash.</p>
<h2>Foster’s has not had much of a growth strategy in recent years. What kind of plans could SABMiller have for the company, in terms of brand development?</h2>
<p>Foster’s got into trouble because it has too many beer brands under one banner.</p>
<p>When you have a variety of brands, and yet you use the same sales force, the same senior management, the same advertising agency and the same research agency, and your employees move around those brands quite frequently, the brands often merge into one in the minds of consumers.</p>
<p>The brands start to lose what is distinctive about them because they are relying on the same resources from their parent company. </p>
<p>SABMiller needs to treat these brands as individuals. They need to ensure that consumers see them as individual products at every point.</p>
<p>That is where Foster’s fell over, and it’s where SABMiller needs to succeed.</p>
<h2>Isn’t it ironic that the Foster’s-labelled beer is actually unpopular in Australia, and is actually a global brand distributed under licence?</h2>
<p>Foster’s has been successful overseas by leveraging associations of what it means to be Australian.</p>
<p>In Europe, where a lot of Foster’s beer is sold, people see the Australian lifestyle as something aspirational – it’s fun, balanced and relaxed.</p>
<p>We tend to take these sorts of associations for granted. When it comes to our brands, we are quite quick to downplay their Australian heritage, when this can actually be of benefit.</p>
<p>Another example is Blackmores vitamins, which is experiencing strong growth in Asia. One of the major reasons they are growing is because they are seen as being distinctly Australia, which in people in Asia associate with high-quality and safety.</p>
<p>Blackmores has successfully leveraged Australia’s identity in its overseas expansion, but other companies tend to downplay this identity.</p>
<p>The irony with Foster’s is that it took an overseas company [Heineken] to build on that brand and export it overseas. [Heineken makes and sells Foster’s in Europe under a licensing agreement.]</p><img src="https://counter.theconversation.com/content/3499/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dean Wilkie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Foster’s Group’s acceptance of a $12.3 billion takeover bid from global brewer SABMiller will see the ownership of some of Australia’s most popular beer brands, such as Victoria Bitter and Cascade, fall…Dean Wilkie, Lecturer, Australian School of Business, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/29592011-08-21T20:42:57Z2011-08-21T20:42:57ZIt’s hard to see why shareholders won’t ditch Foster’s<figure><img src="https://images.theconversation.com/files/3034/original/fosters_chairman.jpg?ixlib=rb-1.1.0&rect=61%2C61%2C2877%2C1745&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Foster's chairman David Crawford is under pressure from a hostile bid from SABMiller.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>If I were a shareholder in Foster’s, which is facing a hostile takeover bid from global brewer SABMiller, there are three questions that I would ask myself before deciding whether to sell my stake.</p>
<p>First, what is the market outlook for Foster’s, in terms of its consumer growth and its market share?</p>
<p>Second, does the company’s current management have the demonstrated capability to deliver and meet its own growth objectives?</p>
<p>Third, is the share price under the current management likely to exceed the $4.90 bid (less newly declared dividends) on the table from SABMiller, or will it fall further when the offer is withdrawn? </p>
<p>Hopefully it will be sweetened above $5.00 as is often the case in such deals – so keep a close watch. I would expect a sweetener. </p>
<p>These are important questions that need to be answered before deciding on whether to take the money. </p>
<p>Here’s why.</p>
<p>Foster’s has languished until this recent bid, following some significant problems with its acquired wine business. It has seen a significant decline in consumer demand for its products, with its beer sales falling. Its share price hit a low of $4.20 in May and has bounced back on the takeover noise, but it hasn’t seen much sustained improvement in recent times.</p>
<p>The share price climbed during the market peak in 2007, probably due to a healthier economy and an overall market rise rather than the company’s fundamentals. The price is now around what it was in 2004-05.</p>
<p>Looking to the future of the share price, it’s worth keeping in mind the worsening global economic conditions, and the fact that Foster’s share of beer consumption has fallen by at least 2% this year.</p>
<p>The key question that shareholders need to ask themselves is this: where is the company’s growth going to come from?</p>
<p>The management at Foster’s has not outlined any clear strategies for the future to achieve a sustained share price significantly above what is offered. There’s no growth story for the company, so shareholders should think carefully about whether the share price is at risk of falling even further if the offer fails.</p>
<h2>Off-market offer</h2>
<p>SABMiller intends to make an off-market offer to shareholders, so there are no brokerages involved. It will directly contact shareholders, whose details are available through the share registry.</p>
<p>SABMiller will essentially go around the Foster’s board and put the offer direct to the shareholders. </p>
<p>There are a range of regulations around disclosure when a company begins buying up shares in another company, but these don’t apply in this case because SABMiller has come straight out and said that it’s making a hostile bid.</p>
<p>This is typical of their style – they want to take over the entire company and control it.</p>
<p>SABMiller has developed all of its brands through acquisitions. They started out as a small South African brewer, and now their brands include Nastro Azzurro in Italy, Miller in the United States, and the Dutch brand Grolsch.</p>
<p>Every few years they go out and buy a large existing brewer with the aim of growing their international footprint. Consequently the company has a significant presence in every part of the globe apart from Australia.</p>
<p>By acquiring the Foster’s brand, they aim to become a truly global brewer. Their only competitor in that space really is the Heineken Group, Anheuser-Busch InBev, and the Japanese companies, Kirin and Asahi.</p>
<p>If the bid fails, then the Foster’s share price could drop dramatically given its current market outlook.</p>
<h2>Hurdles ahead</h2>
<p>Like all takeover bids, SABMiller’s approach faces some regulatory hurdles. The Federal Government’s Takeovers Panel becomes involved in certain circumstances. </p>
<p>There is also an issue for the Australian Consumer and Competition Commission (ACCC), in terms of market dominance. But that doesn’t seem be a particularly big issue, given that there is quite a bit of competition in the market.</p>
<p>The main issue will be getting the deal past the Foreign Investment Review Board, however this wouldn’t seem to be particularly difficult either.</p>
<p>There is also the question of how the market rates the deal. SABMiller’s share price on the market in Johannesburg has suffered somewhat since this bidding process began.</p>
<p>If the market doesn’t think that a takeover is a good idea then the buyer – SABMiller in this case – often sees its share price fall somewhat. Meanwhile, the target – Foster’s – gets a boost in its price. </p>
<p>This might complicate the price ultimately offered for Foster’s. But nonetheless, shareholders will need to decide whether they feel that the offer price is appropriate.</p>
<p>This is a serious gamble, because at some point SABMiller may well lose interest. </p>
<p>They are making an all-cash offer. It has to be a straight cash offer if it’s made on the market, but it doesn’t have to be all cash if it’s made off-market directly to shareholders. If SABMiller were to offer some of its own shares as part of the deal, this could a cash-and-paper offer.</p>
<p>But this probably wouldn’t be very attractive to domestic investors, who make up a large chunk of the shareholder base at Foster’s.</p>
<p>On balance, and given current economic conditions, I believe that shareholders will ultimately accept this deal. </p>
<p>All brewers are facing an uncertain global demand outlook, so shareholders will probably see this as a good time to liquidate their holdings while they can still get a good price.</p>
<p>The Foster’s board is saying that the offer price is far too low, perhaps pointing to higher prices from the past. So they could claim that the average price for the stock is between $5.50 and $6.00, and the offer is undervalued by 10% to 20%. </p>
<p>Of course, shareholders could wonder why, if the company is worth so much, this isn’t being reflected in the share price now. </p>
<p>One important difference between on-market and off-market selling is that if SABMiller decides to sweeten its offer down the line, shareholders who have already agreed to sell-off market in the direct offer will receive the higher price for their stock when the deal finalises. </p>
<p>This doesn’t occur in on-market sales, where shareholders receive the prevailing price.</p>
<p>So unless there is some fundamental reason offered by the board to justify its higher price recommendation based on fundamentals, it is difficult to see why one shouldn’t sell. </p>
<p>That is assuming that SABMiller increases its offer marginally by around 5% to 10% which I would expect. It also depends on the extent to which they have hedged the Australian dollar which has fluctuated around 5% to 10% since this deal appeared.</p><img src="https://counter.theconversation.com/content/2959/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Vaz does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>If I were a shareholder in Foster’s, which is facing a hostile takeover bid from global brewer SABMiller, there are three questions that I would ask myself before deciding whether to sell my stake. First…John Vaz, Course Director Master of App. Finance, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/19772011-06-24T03:55:27Z2011-06-24T03:55:27ZCould SABMiller’s bid for Foster’s signal last drinks for boutiques?<figure><img src="https://images.theconversation.com/files/1871/original/beer.jpg?ixlib=rb-1.1.0&rect=120%2C32%2C1763%2C1426&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Line 'em up: boutique beers could fall if SABMiller's takeover attempt of Foster's succeeds.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>It’s difficult to believe that the iconic Foster’s beer brands, which include VB, Crown Lager and Cascade, could be next to fall into the hands of foreign owners.</p>
<p>If they do, this will mean that over half of the industry –in terms of market share – will be either directly or indirectly owned by foreign interests.</p>
<p>This week’s takeover offer from SABMiller is part of the South African brewer’s move to create global brand, and even boutique global beer brands.</p>
<p>Foster’s rejected the bid, but this story is far from over. SABMiller will no doubt make further offers, and it is likely that other global brewers will make rival bids.</p>
<p>For Australia, this has far reaching consequences well beyond what beer we drink, how it’s made and who owns it.</p>
<p>Global brewers like SABMiller tend to be aggressive buyers of domestic brands and opportunities. </p>
<p>They see value in national brands, an the opportunity to expand their market power well beyond the brands they purchase.</p>
<p>Such brewers have the ability to market and distribute brands on a global scale, squeezing all the value from the brand they acquired.</p>
<p>It’s important to note that Australia has enjoyed a boom in boutique beer over the past couple of decades, despite a heavy concentration in beer retailing in the hands a only a few players.</p>
<p>The two major retailers, Coles and Woolworths, account for more than a third of all the beer sold, which leaves the boutique brands – along with diversity and choice –constantly under threat. It also means that the smaller distributors and resellers are always under pressure from the larger suppliers and retailers.</p>
<p>A foreign takeover of Foster’s has the potential to place more strain on this sector of that market, and consequently, poses significant challenges for new ACCC Chairman Rod Sims.</p>
<p>It will also test how well the new restructured competition law will be enforced.</p>
<p>If SABMiller is successful, then the new owners will be able to execute a strategy that may include a move to further dominate shelf space, bars and hotels. Slowly, diversity will be limited.</p>
<p>The lessening of competition is not a remote consequence. It is the well-worn path of any new owner of a supplier in a market which is prone to market concentration. </p>
<p>In the past two decades there have been many mergers authorised and blessed by the regulator and in many instances by government.</p>
<p>Often there were many undertakings made to preserve competition, access to markets, in support of the public interest. </p>
<p>In the world of commerce, budgets, sales, market share tend to dominate the agenda of suppliers who control the dominate supplier. </p>
<p>The entrance of a new large player could spell and end to the boom in boutique brewers, and stifle what is becoming – against all odds – one of Australia’s most vibrant industries.</p><img src="https://counter.theconversation.com/content/1977/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Peters does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It’s difficult to believe that the iconic Foster’s beer brands, which include VB, Crown Lager and Cascade, could be next to fall into the hands of foreign owners. If they do, this will mean that over half…Michael Peters, Lecturer, Australian School of Business , UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.