SABMiller PLC (SBMRY), maker of Miller Lite, Tuesday said it will continue to pursue a multi-billion dollar takeover of iconic Australian peer Foster's Group Ltd. (FGL.AU), as the global brewing giant bids to strategically ramp up its presence in mature world beer markets.

While downplaying talk of a major shift in its focus, SABMiller --the second-biggest global brewer by volume after Anheuser-Busch InBev NV (ABI.BT) -- is keen to extend its proportional reach out of the fast-growing emerging markets, which in bring 80% of its profits, by building its position in developed consumer economies. SABMiller's dominant emerging markets footprint compares with around 50% recorded by its rivals.

The U.K.-based group also said it expects Australia's growing economy to continue to benefit from booming growth in Asia, where rising incomes and a thirst for a Western lifestyle are fuelling demand for consumer products.

SABMiller's US$9.98 billion (9.51 billion Australian dollar) cash offer for Foster's, subsequently rejected by the Melbourne-based beer maker, is the first big acquisition play in the brewing industry since the Netherland's Heineken (HEIA.AE) bought Mexican brewer FEMSA early last year and follows a trend of global consolidation in the beer business.

The A$4.90-a-share bid sent Foster's shares surging up 13.5% to A$5.14 on a major spike in volume, indicating the market is optimistic that a higher offer will emerge.

"SABMiller can conclude a transaction quickly and will continue to seek engagement with the board of Foster's to put an agreed proposal to Foster's shareholders," said SABMiller Chief Executive Graham Mackay in a statement.

Mackay later said the brewer is "anxious" to talk with Foster's management and dismissed suggestions the bid could turn unfriendly. "We expect to engage with [the board]. This is not a hostile offer to shareholders," he said in an investor call.

Foster's, which is Australia's biggest brewer by sales with 24 beer brands and 15 spirits brands, said the bid--an 8.2% premium to Monday's closing share price of A$4.53--"significantly undervalues the company", and it doesn't intend to take any further action in relation to the offer.

At 1152 GMT, SABMiller shares were down 69 pence, or 3.2%, at 2113 pence, the biggest faller on the FTSE 100 blue chip index. Analysts said that while the company's big play for Foster's wasn't a surprise, investors previously have expressed concern that SABMiller shouldn't overpay for assets in a mature market that could dilute its growth prospects.

The attempt by the London-based company to buy one of Australia's most famous brands --once marketed with the slogan "Foster's, Australian for beer"--could also intensify debate over the rising number of foreign takeover bids in Australia. The Singapore Stock Exchange Ltd.'s (S68.SG) US$8.4 billion bid to buy Australia's main stock-market operator ASX Ltd. (ASX.AU) was blocked by Australian Treasurer Wayne Swan in April on the grounds that Australia would lose sovereignty over its clearing systems and the deal would compromise Sydney's goal to become a regional financial hub.

A Treasury spokesman wouldn't comment on the SABMiller bid for Foster's. He said the Foreign Investment Review Board reviews deals based on the country's national interest.

Australian lawmaker Bob Katter, one of four independent lawmakers whose votes are crucial to passing laws for Australia's minority government, said Tuesday that he opposed the bid and criticized the acquisition of Australian companies by foreign firms.

"We need to protect and defend the farm from foreign vandals," he told Dow Jones Newswires. Katter wants a "proper" oversight tribunal created that ensures strategically important local industries aren't taken over by foreign buyers.

Still, SABMiller said it has a "proven track record" of improving the financial and operational performance of the businesses it acquires.

SABMiller's bid follows the recent demerger of Foster's wine business into a separate listed company Treasury Wine Estates (TWE.AU). The wine business has struggled in recent years and was viewed as a hurdle to any takeover approach.

Foster's beer business has long been considered a potential takeover target. Sales of beer in Australia have come under pressure in recent years as specialist boutique and low-carbohydrate beers have grown in popularity. In Foster's most recent financial results, the Carlton and United Breweries beer volumes for Australia declined 5.8%. Management said its beer division was hurt by a "significant decline" in beer market volume in Australia.

For SABMiller, maker of Grolsch and Peroni Nastro Azzuro, the move marks a change in direction, having previously pegged its growth to emerging markets.

At the end of May, SABMiller said fiscal-year net profit rose on volume growth in Asia and Africa, cost-cutting and some price increases, but was also cautious over the outlook for inflation and the pace of recovery in Europe and North America.

It wants to create an "attractive global spread of businesses, with a focus on developing strong and successful brand portfolios," the group said Tuesday in a statement. Foster's is an attractive asset with seven of the country's top 10 beer brands, it noted.

A deal at the current price would be the fifth largest takeover in the brewing industry's history, according to Dealogic data.

The Australian beverages market has been consolidating in recent years. Kirin Holdings Co. (KNBWY) acquired Foster rival Lion Nathan Ltd. for about A$3.3 billion in 2009.

Analysts said SABMiller's bid for Foster's falls short of what Kirin paid for Lion Nathan, on a price-to-forward earnings multiple.

If the multiple paid by Kirin for Lion Nathan were applied to Foster's, that would equate to a A$5.40- to A$5.50-a-share offer, Citigroup analyst Andy Bowley said in a note.

"We expect SABMiller to return with a higher bid though question whether it can meet our view of the board's expectations given limited synergies, low post-deal returns, and added risk given current Australian dollar strength," Bowley said.

Some analysts said rival bidders are likely to emerge.

But Heineken NV (HEIA.AE) said it is primarily interested in expansion in emerging markets.

"We aim to balance our exposure between emerging and mature markets and if we were to do a large acquisition in a mature market, this would again increase our exposure to mature markets which we aimed to reduce in past years," a spokesman said. The group currently generates 43% of its operational profit from mature markets, down from 63% five years ago.

Carlsberg A/S (CARL-A.KO) Chief Executive Joergen Buhl Rasmussen Monday told Dow Jones Newswires that it is looking at a long list of potential takeover candidates, but dismissed a potential bid for Foster's. "One can look at Australia and ask: is it a growth market? Is it part of Asia? and conclude from that," he said, adding "It's not a top priority for Carlsberg."

AB InBev declined to comment on whether it would make a rival bid for Foster's.

Japanese brewer Asahi Breweries Ltd. (2502.TO) has also been viewed as a potential buyer of Foster's beer business, in part because of its existing tie-up with Foster's to market Asahi's flagship beer in Australia.

A spokesman for Asahi Breweries wouldn't comment on whether the company is considering bidding for Foster's. The company's president, Naoki Izumiya, has been advocating for overseas acquisitions as a way to grow sales.

SABMiller's joint venture partner in Australia, Coca-Cola Amatil (CCL.AU), said earlier Tuesday the pair were amending the terms of their JV to allow SABMiller to buy shares in Foster's. The initial arrangement surrounding the Pacific Beverages JV limited SABMiller's ability to buy shares in Foster's in its own right.

Mackay said he doesn't expect antitrust hurdles to arise from the change in the terms of the joint venture. "We do not anticipate difficulties in that regard," he said.

Foster's is being advised by Goldman Sachs (GS), Gresham and Allens Arthur Robinson.

SABMiller is being advised by Moelis, JP Morgan (JPM) and RBS.

-By Cynthia Koons and Gavin Lower, Dow Jones Newswires; 61-3-9292-2095; gavin.lower@dowjones.com

(David Rogers in Sydney, Hiroyuki Kachi in Tokyo, Flemming Emil Hansen in Copenhagen and Anna Marij van der Meulen in Amsterdam contributed to this article.)

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