By Saabira Chaudhuri
LONDON--A public spat continued Thursday between Anheuser-Busch
InBev NV and its would-be takeover target SABMiller PLC, increasing
the uncertainty of an accepted deal by Wednesday's U.K.
deadline.
AB InBev said SABMiller's claim that its latest acquisition
proposal undervalues the London-based brewer "lacks credibility."
The world's largest brewer, based in Belgium, said SABMiller's
shareholders should "voice their views and should not allow the
board of SABMiller to frustrate this process and let this
opportunity slip away."
"We've noted their announcement--it contains nothing new," an
SABMiller spokeswoman responded. The maker of Pilsner Urquell and
Peroni Nastro Azzurro previously accused AB InBev of making
proposals that are "highly conditional," with several regulatory
and structural uncertainties, and said the latest proposal "very
substantially undervalues" it.
Over the past three weeks, second-ranked global brewer SABMiller
has dug in, rejecting three proposals from AB InBev. On Wednesday,
SABMiller took just six hours to reject AB InBev's proposed offer
of GBP42.15 ($64.80) a share in cash alongside a less valuable
cash-and-stock deal available to 41% of SABMiller's shareholders.
Under U.K. takeover rules, AB InBev has until Oct. 14 to make a
firm offer or walk away for at least six months.
Despite the posturing on both sides, many analysts think a deal
will be announced.
"Both parties have a lot at stake," said Berenberg analyst
Javier Gonzalez Lastra. AB InBev, he said, "needs a sizable
transaction for its next cycle of growth as profit growth becomes
more difficult to come by in its two core markets of U.S. and
Brazil." Meanwhile, "the SABMiller board is increasingly under
pressure" now that AB InBev's proposal is public and Marlboro
cigarette maker Altria Group Inc., SABMiller's largest shareholder,
has declared support.
The sparring is "more as a form of public negotiation than
serious marking of their respective territories," said RBC analyst
James Edwardes Jones. "Neither side can afford this deal to fall
through."
SABMiller's share price has weakened from a year ago, while AB
InBev's performance has worsened. Consumers in North America and
Europe have been steadily shifting toward wine or spirits such as
bourbon over two decades. When drinking beer, more are bypassing
the mass-market lagers that are the mainstays of global beer giants
in favor of craft beers and Mexican imports.
Still, SABMiller's shares closed at GBP36.41 in London on
Thursday, implying that investors are baking in the likelihood that
a deal might not go through--either due to antitrust issues or
because SABMiller's board won't budge.
AB InBev Chief Executive Carlos Brito on Wednesday said the
cash-and-stock alternative was designed "with and for" SABMiller's
second-largest shareholder, the Santo Domingo family of Colombia.
The family and Altria between them hold 41% of the company. The
package comes with tax and accounting advantages for those holders
that would balance out the lower nominal value.
Altria has indicated it would accept a deal at or above AB
InBev's latest proposed price, but the Santo Domingos continue to
hold out. Whether AB InBev can turn that around is a key issue.
Referring to both Altria and the Santo Domingo family, Mr. Brito
said: "There's no transaction without both of these big
shareholders supporting and taking the paper."
Alejandro Santo Domingo, one of the family's representatives on
the SABMiller board, declined to comment Thursday.
Investors have been burned lately by a string of deals that have
fallen through. Following the news that AbbVie Inc. could abandon a
$54 billion takeover for Shire PLC last year, Shire's share price
sank 22% in a day. When Monsanto Co. in August dropped its $46
billion bid for Syngenta AG, the Swiss agribusiness giant's shares
fell 18%.
Shares can also trade well below a likely offer price to account
for the time it would take for a deal to be completed. Given the
antitrust hurdles that would be tied to a merger between the
world's two largest brewers, some antitrust experts have estimated
the deal could take as long as a year to close.
Many in the industry think AB InBev will go higher than its
latest offer.
Sterne Agee analyst April Scee said AB InBev's current offer
undervalues SABMiller "given Africa is the last frontier in beer."
SABMiller has a long-standing presence in Africa, with operations
in 38 African markets.
"We expect a deal to be done at around GBP44 per share," Mr.
Edwardes Jones said, referring to the all-cash component. With the
cash-and-stock alternative, the overall per-share deal price would
come in lower.
While AB InBev's recent overtures have been far from friendly,
many industry experts said they would be surprised if the brewer
went hostile, or took an offer to shareholders without the blessing
of the board. Roughly 30% of SABMiller's earnings last year came
from joint ventures and associates, a tangled web of relationships
that AB InBev would need its cooperation to navigate.
AB InBev is used to hard negotiating. The company's $20.1
billion deal for Mexican brewer Grupo Modelo in 2012 was no walk in
the park. The Justice Department in 2013 sued AB InBev, seeking to
block its deal with the Corona brand owner. The suit eventually was
settled after AB InBev agreed to sell Modelo's entire U.S. business
to Constellation Brands Inc. and acquire the 50% of Modelo it
didn't already own.
Tripp Mickle in Atlanta contributed to this article.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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(END) Dow Jones Newswires
October 08, 2015 13:54 ET (17:54 GMT)
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