"The board of Foster's, together with its advisers, has carefully considered the proposed offer and intends to unanimously recommend shareholders reject the offer," the company said in a statement.
"The board of Foster's reiterates its belief that an offer price of $4.90 per share significantly undervalues the company in the context of a change of control."
Foster's shares have gained 0.4% after the announcement, despite the benchmark S&P/ASX200 index falling nearly 1%.
Foster's also said there were a large number of conditions in the deal.
Shares fall after weak Wall Street lead
The Australian sharemarket has fallen nearly 1% this morning after a weak night on Wall Street, sparked by poor financial results in the tech sector.
The benchmark S&P/ASX200 index was down 23 points or 0.54% to 4280.5 at 12.00 AEST, while the Australian dollar rose half a cent higher to $US1.06c.
AMP shares rose 4.34% to $4.33, while Commonwealth Bank shares fell 0.42% to $47.20. Westpac shares lost 0.44% to $20.42 as ANZ fell 0.97% to $20.38.
In the United States, the Dow Jones Industrial Average rose 4.28 points or 0.04% to 11,410.
AMP profit falls 18%
AMP has recorded a profit decline of 18% to $329 million for the half-year ending June 30, the company has announced, although shares have risen 4.81% to $4.35.
Chief executive Craig Dunn has said he expects market volatility to continue.
"It's always hard to gauge. It is obviously going to turn around at some stage," he said. "I think it is a reflection of just caution by consumers because of global uncertainty continuing and uncertain market."
"I am not sure we are going to see a great change in the short term."
ASX profit rises in full year
ASX has announced a 7.4% increase in full year net profit to $352.3 million, although it has said global market uncertainty has restricted its gains.
"While we were disappointed that the attempted combination with the Singapore Exchange did not proceed, ASX maintained its focus on preparing for competition and a multi-market environment," chief executive Robert Elstone said in a statement.
"During the recent period of dramatic market volatility, driven by sovereign debt concerns in the US and Europe, ASX's systems and processes continued to provide consistent service availability for its many users."
The ASX also said there were 160 new listings during 2011, compared to just 93 in the previous year.
Asahi to purchase Independent Liquor
Japanese group Asahi has said it will purchase the remaining shares in Independent Liquor Group for $1.22 billion.
"The transaction demonstrates our commitment, in line with our strategy, of increasing our presence overseas and enhances Asahi Group's position in the global alcoholic beverages market," Asahi president Naoki Izumiya said in a statement.
"Integrating Independent Liquor into our existing operations in the region, including soon to be acquired P&N and Charlies Group, will bring real benefits to both Asahi Group and Independent Liquor."
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