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SABMiller backs AB InBev offer for biggest-ever consumer takeover

By Martinne Geller and Philip Blenkinsop
Posted on Monday, 1 August 2016 10:12

The deal, worth 79 billion pounds ($104.9 billion), remains to be voted on by shareholders – a hurdle that could become harder to clear since the board intends to request that shareholders be divided into two classes, with each needing to approve the terms.

SAB’s board considered the best interests of the company as a whole

One prominent investor – Aberdeen Asset Management – voiced opposition to the revised offer, saying it still undervalued the maker of beers including Castle Lager and Pilsner Urquell, which has a strong footprint in fast-growing markets of Latin America and Africa.

AB InBev added a pound-per-share to its cash bid on Tuesday to quash investor dissent over what would be the largest-ever takeover of a British company. Its earlier offer had been made less attractive by a sharp fall in sterling following Britain’s vote in June to leave the European Union.

“The board’s decision was difficult given changes in circumstances since the board originally recommended £44 per share in cash last November,” said SAB Chairman Jan du Plessis. “We believe the final cash consideration of £45 per share to be at the lower end of the range of values considered recommendable.”

“In reaching its decision, SAB’s board considered the best interests of the company as a whole, taking into account all salient facts and circumstances,” du Plessis said, adding that it had received extensive shareholder feedback.

Bernstein Research analyst Trevor Stirling said that at current exchange rates, he expects the deal to get approved. “It’s better than walking away,” he said. “But if sterling falls another 5-10 percent then all bets are off.”

Two classes

AB InBev, the Belgium-based maker of Budweiser and Stella Artois, also raised by 88 pence a special cash-and-stock alternative aimed at SAB’s two largest shareholders, Altria and Bevco. That alternative had been at a discount to the cash offer last year, but given current exchange rates, is now at a premium.

The board said it plans to ask the UK court overseeing the process to treat Altria and Bevco as a separate class of shareholders. Under that scenario, three-quarters of both classes of voting shareholders would be needed to pass the deal.

If treated as a single class, the hurdle would be lower since Altria and Bevco have already pledged to vote in favour. Together they control about 41 percent of the company.

Societe Generale analyst Andrew Holland said SAB had effectively upped the requirement on backing for the deal to a potential 85 percent. “They appear to be cooperating but they’re doing it in a way that is somewhat unhelpful to ABI.”

AB InBev said it believes the proposed combination “represents a compelling opportunity for all SABMiller and AB InBev shareholders”. AB InBev has secured conditional regulatory approval in China, its final pre-condition for the deal.

Aberdeen reiterated on Friday that it would vote against the deal but said it welcomed the decision to treat the shareholders as different classes. The vote is likely to take place in October or November, and if the offer is approved, this would allow AB InBev to meet its target of closing the deal this year.

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