Foster's beer and wine businesses to split

Australia's largest brewer Foster's is to separate its struggling wine arm from its beer business.

The firm expanded into wine in 1996 when it bought the Mildara Blass brand. The business now includes Southcorp with its Penfolds and Lindemans brands.

Foster's wine business is the world's second largest after Constellation Brands.

However, earnings from wine, which accounted for two-fifths of the group's total by 2007, have fallen heavily.

"We are increasingly seeing the benefits of operationally separating the beer and wine businesses," said Foster's Group chief executive Ian Johnston.

The demerger and separate stock market listings for the wine and beer units is planned to be completed in the first half of 2011.

Foster's, which hopes the move will make it A$100m in annual savings from 2011, saw its shares rise by close to 9% after the announcement, before falling back slightly to close up 6%.

Theo Maas, an analyst at Arnhem Investment Management, said: "For the beer business, this is the first step on its way to being taken over."