AB InBev Raises Offer for SABMiller -- 8th Update
July 26 2016 - 10:35AM
Dow Jones News
By Saabira Chaudhuri
LONDON-- Anheuser-Busch InBev NV on Tuesday raised its offer for
SABMiller PLC in their proposed $100 billion-plus beer megamerger,
trying to quell an investor revolt over the valuation of the $100
billion-plus beer merger after the British pound's steep
descent.
The Belgian-based beer giant lifted its cash offer to GBP45
($59.10) a share, from GBP44 a share, to appease many of
London-based SABMiller's shareholders, who have watched the value
of the offer fall along with sterling. The pound sank sharply after
the June 23 vote by Britain to leave the European Union.
That fall has deflated the value of AB InBev's cash-only offer,
intended for most shareholders, compared with a separate,
cash-and-share offer aimed at SABMiller's two biggest shareholders,
U.S. cigarette maker Altria Group Inc. and Colombia's Santo Domingo
family. That so-called partial-share alternative has soared in
value, because AB InBev shares are priced in euros.
AB InBev also raised the cash component of the alternative offer
by 88 pence a share. After Tuesday's sweetened terms and the rise
in the euro against the pound, the partial-share offer is now worth
GBP51.14 based on Monday's closing prices, compared with GBP41.85
in November, when both sides formally agreed on the deal. The
partial-share deal is technically open to all shareholders, but it
comes with a five-year lockup that is unattractive for many
investors.
The fresh offer comes after both companies spent months pursuing
regulatory approval for the megamerger around the world. They have
agreed to sell big chunks of their business in the process, raising
the stakes for both to reach a new deal.
AB InBev, the world's largest brewer, said the sweetened offer
was its final one, a turn of phrase that under U.K. recent currency
volatilitytakeover rules prevents it from making another offer for
six months.
SABMiller, in its own statement, said it has hired Centerview
Partners Holdings LLC to give it financial advice following the
recent currency volatility, and that its board would consult with
shareholders and meet to formally review the offer. It said the
chairmen of both brewers held talks on Friday, but they didn't
discuss the terms of a new deal.
The new offer raises the total value of the deal to about GBP79
billion, or $103.81 billion, from its previous offer of about GBP71
billion. The new terms show the deep decline in the pound: The
original offer was worth about $108 billion at November's exchange
rates.
Bernstein estimates that the increased offer represents an 8%
premium to the "fair value" of SABMiller. That is up from 6% before
the increased offer but is still sharply below the roughly 33%
premium when AB InBev's approach was first announced in October,
the firm noted.
In afternoon trading Tuesday, SABMiller shares were down 0.3% to
GBP44.26 in London after an earlier modest rise. AB InBev shares
were up 0.6% to EUR115.50 ($126.83) in Brussels.
Hedge funds including Elliott Management Corp. and TCI Fund
Management Ltd. have built stakes in SABMiller in recent days and
have been agitating for a higher offer, according to a person
familiar with the matter.
Some big SABMiller shareholders were digging in their heels.
Aberdeen Asset Management PLC, one of SABMiller's major investors,
said the new offer still undervalues the company.
"The revised deal remains unacceptable," the investment firm
said, "as it both undervalues the company and continues to favor
SABMiller's two major shareholders." It said that in the absence of
a better offer, it was content to stay a shareholder in SABMiller
as a stand-alone firm. Aberdeen owns 1.2% of SABMiller.
For 41.6% of stock, AB InBev created the partial-share
alternative as a combination of cash and unlisted stock, designed
to let Altria and the Santo Domingo family's BevCo Ltd. investment
vehicle retain their relative holdings in the combined firm and
their board seats. The alternative also protects them against some
tax and accounting disadvantages related to a deal.
RBC analyst James Edwardes Jones said he had "already felt that
ABI was paying a full price" and that the latest deal is even more
expensive.
The two brewing giants had expected to close their merger in the
second half of this year. The deal has already been approved by
competition authorities in the U.S., the European Union, South
Africa and several other jurisdictions, leaving Chinese approval
the last big antitrust hurdle to the combination.
The deal is critical to AB InBev's growth. Buying SABMiller
allows AB InBev to reduce its reliance on the U.S., where it has
had trouble getting younger people to drink more Budweiser, and
gives it access to the growing African market, which is expected to
drive beer-industry sales.
Ian Walker contributed to this article.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
July 26, 2016 10:20 ET (14:20 GMT)
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