Australian winemaker Southcorp has rejected a takeover offer worth 2.5bn Australian dollars ($1.9bn; £1bn) from brewing giant Foster's Group.
Southcorp, whose brands include Penfolds, Rosemount and Lindemans, dismissed the offer as inadequate.
The two companies held four days of talks after Foster's bought an 18.8% stake in Southcorp on 13 January.
A merger would create a global player with worldwide annual sales of 39m cases and revenues of A$2.6bn.
'Opportunistic bid'
Southcorp said Foster's A$4.17-a-share takeover proposal offered a "excellent strategic fit" but undervalued the company.
"Southcorp's board has informed Foster's that it is not prepared to recommend the offer as it does not adequately reflect the strategic value of the company," said Southcorp chairman Brian Finn.
" The combination will transform the global wine industry and significantly enhance Australia's competitive position on the global stage "
Southcorp said Foster's takeover offer was "opportunistic".
However, it said that the offer may represent an opening bid, opening up the possibility of Foster's returning with an improved offer.
"Foster's can go higher," said David Spry, an analyst at FW Holst & Co.
'Unrivalled portfolio'
A combination of the two companies would create a global player with an "unrivalled" collection of premium wine brands, Foster's said.
Despite being best known for brewing Foster's Lager, Foster's is already one of Australia's largest wine producers, owning the Beringer and Wolf Blass brands among others.
"The combination of Foster's and Southcorp will transform the global wine industry and significantly enhance Australia's competitive position on the global stage," said Trevor O'Hoy, Foster's chief executive officer.
Analysts expressed differing opinions on whether the deal would be a good one for Foster's.
Too expensive?
FW Holst's Mr Spry said he thought Foster's would raise its bid because "they really do need to beef up their Australian brands".
However, Hugh Giddy, deputy portfolio manager of Perennial Value Management, was sceptical about the merits of the deal.
"I don't think they are going to improve the company by getting into Southcorp because they are paying handsome prices for companies that do not generate much cash," he said.
Foster's spent A$584m on buying an 18.8% stake in Southcorp last week from the Oatley family, which founded the Rosemount Estates business and later merged it into Southcorp.
Foster's offer for the rest of Southcorp was pitched at the same price per share, $4.17. The offer includes a committment to take on A$500 of Southcorp's debts, taking the total cost of acquiring the winemaker close to A$3.6bn.
Southcorp's shares rose 12% to A$4.76 on news of the offer but Foster's shares fell 3.7% to A$5.44.
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