Scottish & Newcastle Closes Fosters Deal

17/05/06 Scottish & Newcastle has completed its £309 million acquisition of the Foster’s brand in Europe, the Russian Federation and other countries in the CIS.

On 11 April 2006, Scottish & Newcastle plc announced that it had agreed to acquire the Foster’s brand in Europe, the Russian Federation and other countries in the Commonwealth of Independent States from Foster’s Group Limited, conditional only on regulatory clearance under Australia’s Foreign Acquisitions and Takeover Act 1975. S&N has received confirmation from the Australian Treasurer that the Acquisition has been approved and announces that the Acquisition has completed.

In 1995, S&N acquired from FGL the licence to brew, package and market Foster’s in the UK, the Republic of Ireland and Continental Europe (including the Russian Federation and certain other Eastern European countries of the CIS). However, ownership of the Foster’s brands and associated rights remained with FGL. Sales of Foster’s in these territories have grown considerably under S&N’s management and the brands accounted for some 14 per cent. of S&N’s total sales (by volume) in the year ended 31 December 2005. Pursuant to the terms of the 1995 agreement, S&N was obliged to pay FGL annual royalties from sales of Foster’s as well as support the brands with a minimum contractual marketing spend. In the year ended 31 December 2005, royalty payments amounted to £15 million.

Foster’s worldwide volumes amounted to approximately 9 million hectolitres in 2005. S&N is responsible for approximately 82 per cent. of the total worldwide sales of Foster’s by volume, the majority of which is sold in the UK (approximately 7 million hectolitres). In the last three years, sales growth by volume has averaged 6 per cent. in the UK and 15 per cent. in Continental Europe (including the Russian Federation), outperforming overall beer sales in both these markets.

S&N will now gain outright ownership and control of the existing Foster’s brands (Foster’s Draught, Foster’s Export, Foster’s Ice) and any new Foster’s brands in those territories originally covered under the 1995 agreement. This will allow the Group to optimise the brands’ positioning as well as exploit fully their development potential in these territories and thus ensure that the current strong sales momentum can be maintained. The Acquisition is in line with the Group’s long-term strategic objective of controlling its core brands thus enabling the Group to invest in the brands to the benefit of S&N’s shareholders.