Australian brewing company, The Foster's Group, has rebuffed a A$2.7bn (£1.6bn) bid from an international private equity firm for its wine business - the second-largest in the world.

The firm said the proposal "significantly" undervalued its Treasury Wine Estates division, for which analysts have put a price of as much as A$3bn.

The Foster's Group is capitalised at around A$12bn and its blue liveried lager is synonymous with Australia. Although the company has spent A$7bn to shore up the wines division, it has been plagued by write-downs and poor returns.

Foster's did not identify the suitor in its statement, but The Australian newspaper has reported that US-based Cerberus Capital Management is the bidder.

In rejecting the proposal, the brewer said that spinning off its wines business through a demerger was "most likely to represent the best outcome for all Foster's shareholders".

Foster's shares were up 4.5 per cent on Wednesday after the offer was rejected.