SABMiller Board Backs AB InBev's Higher Offer -- 6th Update
July 29 2016 - 1:16PM
Dow Jones News
By Tripp Mickle and Saabira Chaudhuri
SABMiller PLC's board on Friday recommended that shareholders
approve Anheuser-Busch InBev NV's increased offer of GBP45 a share,
bringing an end to several turbulent weeks that jeopardized a more
than $100 billion combination of the world's largest brewers.
The board's decision to recommend the deal came on the same day
that Chinese regulators approved the merger. The approval by
China's Ministry of Commerce, which was expected, was the final
regulatory precondition AB InBev needed before moving forward with
the transaction.
AB InBev shareholders and SABMiller shareholders now must vote
on the deal, which is expected to close this year.
Shares of AB InBev, the world's largest brewer, rose 4.6% in
trading in Brussels, while SABMiller's shares added 2.1% in
London.
"In reaching its decision, the board has considered the best
interests of the company as a whole and has taken into account all
salient facts and circumstances. The board has also received
extensive shareholder feedback and considered the views of our
financial advisers," SABMiller Chairman Jan du Plessis said in a
statement.
He called the decision as "difficult" and "challenging" in the
wake of last month's vote by the U.K. to leave the European
Union.
AB InBev on Tuesday raised its offer for SABMiller PLC to GBP45
a share from GBP44 a share, trying to quell growing unease among
SABMiller shareholders after the British pound's plunge. The deal
became a target for activist investors and traders after the U.K.
voted to leave the European Union last month.
The recent turmoil around the AB InBev-SABMiller deal
illustrates how the U.K. vote has rocked global businesses. The
subsequent descent of the British pound caused the value of AB
InBev's cash offer to SABMiller to fall below its cash-and-share
offer because AB InBev shares are priced in euros. The discrepancy
raised alarm among shareholders and board members.
The turmoil proved costly for AB InBev, forcing it to raise its
offer by about $2 billion and adding to losses from its decision
last December to hedge its exposure to the British pound. With the
currency falling by more than 10% against the dollar, the hedge has
cost AB InBev an estimated $10 billion, according to Susquehanna
International Group LLP.
The sweetened offer won support from both of SABMiller's largest
shareholders, U.S. tobacco company Altria Group Inc. and Colombia's
Santo Domingo family. Both plan to take the cash-and-share
proposal. In addition, SABMiller's own board of directors have
committed their shares to the deal, according to AB InBev Chief
Executive Carlos Brito.
Other board members remained concerned about AB InBev's
sweetened offer, a person familiar with the matter said. In an
effort to get an independent opinion on the offer, Mr. du Plessis
brought on Centerview Partners Holdings LLC and offered it a flat
fee to provide financial advice on the new offer, a person familiar
with the decision said.
The board's recommendation clears the way for the shareholder
votes, the next step in the process. Mr. du Plessis said the
company would ask the U.K. court to have Altria and the Santo
Domingo family vote on the deal as a separate class of
shareholders.
At least two shareholders, including Aberdeen Asset Management
PLC, opposed the new offer. Aberdeen, which has about 1.2% of
SABMiller shares, said Friday that it plans to vote against the
deal because it remains uncomfortable with the deal's structure and
believes the deal undervalues the company.
However, other shareholders have embraced it. David Simon, chief
executive of SABMiller shareholder Twin Capital Management LLC,
supported it and said those who opposed it were "being too
shortsighted."
Buying SABMiller will give AB InBev access to the fast-growing
African beer market as well as certain attractive Latin American
markets like Peru and Colombia, while reducing its dependence on
slower-growth markets like the U.S. and Brazil.
AB InBev had agreed in March to sell SABMiller's China business
to China Resources Beer Holdings Co. The $1.6 billion deal would
give the government-controlled brewer SABMiller's 49% interest in
the joint venture known as CR Snow and full ownership of Snow, the
world's top-selling beer by volume.
Taking over Snow would make China Resources the largest brewer
in China, with a 30% market share, according to industry tracker
Seema International Ltd. AB InBev has an estimated 18% market share
in China, while Tsingtao Brewery has 22%, Beijing Yanjing Brewery
Co. has 13% and Carlsberg A/S has 6%.
China's Ministry of Commerce is the fourth and final major
regulator to approve the combination of the world's two largest
brewers. The deal also was contingent upon approval in the U.S.,
Europe and South Africa.
Write to Tripp Mickle at Tripp.Mickle@wsj.com and Saabira
Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
July 29, 2016 13:01 ET (17:01 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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