SABMiller, AB InBev Agree on Key Terms of Deal
October 13 2015 - 3:50AM
Dow Jones News
LONDON—SABMiller PLC's board has agreed on the key terms of a
sweetened potential takeover offer by Anheuser-Busch InBev NV
valuing it at £ 68 billion ($104.36 billion), setting the stage for
the creation of a brewing behemoth that would dominate much of the
world's beer market.
After weeks of back and forth, SAB Miller's board has agreed to
unanimously recommend to its shareholders AB InBev's proposal to
pay £ 44 a share to buy the London-based brewer, marking a 50%
premium to its share price on Sept 14, the day before media
speculation about a potential deal emerged. For 41% of stock AB
InBev is offering a partial-share alternative, essentially a
combination of cash and stock translating into a lower per-share
price of £ 39.03. The alternative was devised for SABMiller's two
largest shareholders, Altria Group Inc. and the Santo Domingo
family's investment vehicle BevCo, and helps them with taxation and
potential accounting issues.
SABMiller has asked the U.K. Takeover Panel to extend the
so-called put-up-or-shut-up deadline, under which AB InBev needs to
make a firm offer for it or walk away, to Oct 28. The previous
deadline was Wednesday.
If AB InBev can't get the necessary regulatory clearances for
the deal to close, or its shareholders don't approve the deal, the
brewer would pay SAB Miller a breakup fee of $3 billion. AB InBev
said it will pay for the cash part of the deal through its internal
resources and issuing new debt.
The revised proposal is the fifth AB InBev has made for
SABMiller in recent weeks and comes after the Belgian brewer on
Monday said it was prepared to offer SABMiller's shareholders £
43.50 a share in cash and a partial-share alternative of £ 38.88,
translating into a combined price of £ 67.4 billion.
SABMiller had rejected its first three proposals, saying they
significantly undervalued it. On Monday, it declined to comment on
the fourth proposal.
SABMiller's two largest shareholders, Altria and the Santo
Domingo family, which have a 41% stake in the London-headquartered
brewer between them—had initially come down on different sides of
the offer. Altria, last week offered its support, but the Santo
Domingo family joined the rest of the board in rejecting AB InBev's
offer.
Tuesday's deal is unanimously supported by SABMiller's board,
meaning the Santo Domingo family changed its mind.
A tie-up between the two beer companies, if successful, would
bring household brands such as Budweiser, Corona and Stella Artois
together with Pilsener Urquell, Grolsch and Peroni, and give the
combined company a major presence in the U.S., China, Europe,
Africa and Latin America. Together, AB InBev and SABMiller sell
over 30% of the world's beer.
AB InBev's next big challenge is to get regulatory approval for
the deal, which is expected to face antitrust scrutiny around the
world and could take as long as a year to close according to some
antitrust experts.
The biggest regulatory hurdle is likely to be the crucial U.S.
market, where AB InBev already has a roughly 45% market share and
London-based SABMiller controls a further 25% through its
MillerCoors LLC joint venture with Molson Coors Brewing Co. AB
InBev was forced to dramatically restructure its $20.1 billion
acquisition of Mexican brewing giant Grupo Modelo SAB in 2013 after
the U.S. Justice Department sued to block the deal.
Another potential regulatory headache is China, where AB InBev
had a 14% market share last year, according to Euromonitor. Chinese
authorities could require the brewer to exit SABMiller's joint
venture with China Resources Enterprise Ltd., which controls 23% of
the market and produces the top-selling Snow brand. Some
divestitures could also be required In Latin America.
A question mark also hangs over the fate of the two brewers'
bottling arrangements with arch rivals Coca-Cola Co. and PepsiCo
Inc. SABMiller has disclosed in regulatory filings that a change of
control at the company would give Coke "certain rights" under their
bottling agreements. AB InBev's bottling agreements with PepsiCo
are set to expire at the end of 2017. The agreements are
automatically extended for another 10 years unless either company
gives written notice at least two years before they expire.
The acquisition of SABMiller, with its big presence in Africa,
would give AB InBev a major launchpad for its beers in markets
where it has virtually no presence. Consumption in developed
markets has slowed so much that the global beer market is expected
to decline this year for the first time in 30 years, falling by
0.1%, according to industry tracker Plato Logic. The bulk of global
growth will come from Africa, which is expected to grow by 2.6%
A deal between SABMiller and AB InBev has been rumored for
years, and has been described by some analysts as the last major
piece of consolidation that remains in the beer industry. Research
firm Euromonitor has estimated that the combined company's market
share would be 29% after the deal after likely divestments, giving
it a 20 percentage point lead over the next biggest brewer,
Heineken NV.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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(END) Dow Jones Newswires
October 13, 2015 03:35 ET (07:35 GMT)
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