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SABMiller PLC (SBMRY) said Tuesday it will continue to pursue a takeover of Foster's Group Ltd. (FGL.AU) after the Australian beer maker rejected a 9.51 billion Australian dollar (US$9.98 billion) offer from the global brewing giant.

SABMiller's bid for Foster's is the first big deal for the brewing industry since Heineken (HEIA.AE) bought Mexican brewer FEMSA early last year and follows a trend of global consolidation in the beer business.

SABMiller --the second-biggest brewer by volume after Anheuser-Busch InBev NV (ABI.BT)-- sees Australia's economy as continuing to benefit from booming growth in Asia and said Foster's is an attractive asset with seven of the country's top 10 beer brands.

The A$4.90-a-share bid sent Foster's shares 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.

Melbourne-based Foster's said the bid --an 8.2% premium to Monday's closing share price-- "significantly undervalues the company", adding that it doesn't intend to take any further action in relation to the offer.

The attempt by SABMiller to buy one of Australia's most famous brands --once marketed with the slogan "Foster's, Australian for beer"-- could 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.

The 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 seen as discouraging approaches for Foster's before the demerger.

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.

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

For SABMiller, maker of Grolsch, Peroni Nastro Azzuro and Miller Lite, the move marks a change in strategy, having pegged its growth on emerging markets. Emerging markets contribute more than 80% of SABMiller's profits, compared to 50% for its rivals. Meanwhile, the mature markets in which it operates, like North America and Europe, have been under pressure.

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.

Japanese brewer Asahi Breweries Ltd. (2502.TO) has 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.

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

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

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

(David Rogers in Sydney and Hiroyuki Kachi in Tokyo contributed to this article.)

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