SAB Miller is likely to go higher to secure the purchase of Foster’s, but with the Australian beer market in decline, analysts have questioned the potential value of a tie-up. Foster’s rejected an offer of AUS $9.5bn ($4.90 a share) this week, prompted SAB Miller to promise further “engagement” with the board of the Australian brewer.

Philip Gorham, an analyst at Morning Star, told that this could mean at least one more bid from SAB Miller – with the ceiling for an increase likely to be 10-15 per cent. Ian Shackleton, an analyst at Nomura, put forward a similar figure, adding that the initial rejection from Foster’s was a blow for SAB Miller. “With Foster’s rejecting SAB Miller’s approach rather than entering into negotiations, we believe it has left SAB Miller in a relatively weak bargaining position,” said Shackleton.

Nevertheless, the analyst said a counterbid is unlikely. A joint bid from Modelo/ MolsonCoors had been talked about but this now appears unlikely after the Modelo board did not vote on it at a meeting earlier in the week. Gorham added that a Modelo/ MolsonCoors bid would be financially complex, suggesting that AB InBev may be more likely to enter the running.

“I’m curious to see what AB InBev is thinking,” said the analyst. “They may want to see what SAB Miller does next and then try to trump the deal at the last minute or they may come in with a bid soon.” But Gorham said the price put forward already by SAB Miller is “not unreasonable” and “might make other potential acquirers think twice before entering a bidding war”.

He said another bidder could push the price up beyond the 10-15 per cent range and that would be an overpayment.

So what does SAB Miller stand to be gain from acquiring Foster’s? Gorham said it offers access to the Australian market which he described as “a good, mature market” with a strong economy and net immigration. The analyst said beer consumption is falling in the country and that is a concern, especially when the economy is so healthy, but SAB Miller would benefit from the strong profitability of Foster’s. “It will make it a cash cow to feed investment in emerging markets,” said Gorham. “And the Foster’s brand could play more internationally.” Foster’s is a big brand in Australia and the UK but has little in the US and other international markets. Gorham said SAB Miller has the global network to easily drop the Foster’s brand into new markets.

Meanwhile, Shackleton said there is some synergy potential – especially on the revenue side. “We see some opportunity for SAB Miller to drive revenue synergies through consumer uptrading to premium, craft and higher value beers.” Nomura estimates that these are likely to add up to around US $300m.