Many critics of the Fosters Group Ltd takeover of Southcorp Ltd cited a strategic error in judgement of the Fosters Group Ltd board. Fosters Group Ltd also took on significant debt to purchase American wine interests. Their main concerns were firstly, that the board paid too much and secondly, that the wine and market operates differently to the beer market. Just because both are alcohol-based products does not mean they are similar to operate. Commentators believed that the beer business was a good cash business and one that is generally robust in down times. (People still like their beer even in recessions.) However, the wine market was more competitive and had an overabundance of supply that would make it hard for the Fosters Group Ltd to strategically brand. The investment in the wine businesses would also take leadership time away from the beer business as the Fosters Group Ltd spent time on growing the wine business. Approximately five years after the Southcorp Ltd takeover the Fosters Group Ltd entered into a scheme of arrangement to demerge the beer business from the wine business. In May 2011, shareholders in Fosters Group Ltd received one share in Treasury Wine Estates (the new company for the wine business) for every three shares they held in Fosters Group Ltd. Following the split, the Fosters Group Ltd assumed most of the debt. Below is some financial information regarding Fosters Group Ltd at takeover and demerger times.

	Demerger		Takeover
	2011 $000	2010 $000	2005 $000	2004 $000
Net cash flows from operating activities	749.5	934.7	523.4	657.0
Net cash flows from investing activities	(209.7)	(89.9)	(2 314.3)	938.1
Net cash flows from financing activities	(705.9)	(735.8)	1 885.3	(1 225.4)
Total cash flows	(166.1)	109.0	$94.4	369.7
Ending cash balance	58.3	236.7	791.9	706.8
Net profit from continuing operations	1 046.9	553.0	936.1	799.3
Net finance income/(costs)	16.3	(118.8)	(99.1)	(94.9)
Total assets	2 997.3	6 829.8	11 745.3	8 443.1
Total liabilities	2 597.7	4 114.4	4 944.1	4 600.2
Non-current interest bearing liabilities	1 573.5	2 242.6	4 431.6	1 259.6

REQUIRED:

Judge whether you feel the critics were correct in their assessment of Fosters Group Ltd entry into the wine market.

Confirm whether Fosters Group Ltd is a good cash business.