Altria Group, Inc. (Altria) is pleased that Anheuser-Busch InBev
SA/NV (AB InBev) today announced its firm offer to effect a
business combination with SABMiller plc (SABMiller) to create the
largest beer company in the world in a cash and stock transaction
valued at approximately $107 billion.
“Altria fully supports this transaction, and we strongly believe
that the deal is in the best interest of our shareholders,” said
Marty Barrington, Altria’s Chairman, Chief Executive Officer and
President. “Upon closing, Altria will continue to participate in
the global brewing profit pool as a large and significant
shareholder in what will be the industry’s largest company. We
continue to work constructively with the parties toward closing,
and we look forward to working with the AB InBev management team at
the new, combined company.”
At closing, Altria expects to receive an approximately 10.5%
stake in the new, combined company and approximately $2.5 billion
in cash, subject to proration. In addition, the announced
transaction is expected to provide Altria with two seats on the new
company’s board of directors, continue the use of equity accounting
for the beer asset’s contribution to Altria’s earnings, and
maintain a strong asset on the balance sheet. Finally, the
transaction structure provides Altria with tax efficiency.
Additional details of the transaction are attached on Exhibit
A.
Altria’s Profile
Altria currently owns approximately 27% percent of SABMiller’s
ordinary shares outstanding and has been a SABMiller shareholder
since 2002. Altria’s wholly-owned subsidiaries include Philip
Morris USA Inc., U.S. Smokeless Tobacco Company LLC, John Middleton
Co., Nu Mark LLC, Ste. Michelle Wine Estates Ltd. (Ste. Michelle)
and Philip Morris Capital Corporation.
The brand portfolios of Altria’s tobacco operating companies
include Marlboro®, Black & Mild®, Copenhagen®, Skoal®, MarkTen®
and Green Smoke®. Ste. Michelle produces and markets premium wines
sold under various labels, including Chateau Ste. Michelle®,
Columbia Crest®, 14 Hands® and Stag’s Leap Wine Cellars™, and it
imports and markets Antinori®, Champagne Nicolas
Feuillatte™, Torres® and Villa Maria Estate™
products in the United States. Trademarks and service marks related
to Altria referenced in this release are the property of Altria or
its subsidiaries or are used with permission. More information
about Altria is available at altria.com and on the Altria Investor
app.
Forward-Looking and Cautionary
Statements
This press release contains forward-looking statements that
involve a number of risks and uncertainties and are made pursuant
to the Safe Harbor Provisions of the Private Securities Litigation
Reform Act of 1995. Important factors that may cause actual results
and outcomes to differ materially from those contained in the
forward-looking statements included in this press release are
described in Altria’s publicly filed reports, including its Annual
Report on Form 10-K for the year ended December 31, 2014 and its
Quarterly Report on Form 10-Q for the period ended September 30,
2015.
In addition, the factors related to AB InBev’s proposed
transaction to effect a business combination with SABMiller include
the following: the risk that one or more conditions to closing the
proposed transaction may not be satisfied; the risk that a
shareholder or regulatory approval required for the proposed
transaction is not obtained or is obtained subject to conditions
that are not anticipated; AB InBev’s inability to achieve the
contemplated synergies and value creation from the proposed
transaction; the fact that Altria’s election to receive transaction
consideration in the form of equity is subject to proration, which
may result in a reduced percentage ownership of the combined
company, additional tax liabilities and/or changes in our
accounting treatment of the investment; the fact that the equity
securities to be received by Altria as transaction consideration
will be subject to restrictions on transfer lasting five years from
completion of the proposed transaction; the risk that AB InBev’s
share price, which affects the value of Altria’s transaction
consideration, will fluctuate based on a variety of factors which
are beyond Altria’s control; the fact that the strengthening of the
U.S. dollar against the British pound would adversely affect
Altria’s cash consideration as the British pound would translate
into fewer U.S. dollars; the risk that the tax treatment of
Altria’s transaction consideration is not guaranteed; and that the
tax treatment of the dividends Altria receives from the new company
may not be as favorable as dividends from SABMiller.
Exhibit A
This Exhibit A provides additional details regarding the
Anheuser-Busch InBev SA/NV (AB InBev) firm offer to effect a
business combination with SABMiller plc (SABMiller) and the
anticipated implications for Altria Group, Inc. (Altria). The
transaction is subject to certain closing conditions, including
shareholder approvals of both SABMiller and AB InBev and receiving
the required regulatory approvals. Dollar amounts Altria will
receive are estimated at this time and are subject to change.
Additional risks and uncertainties are identified under the heading
“Forward-Looking and Cautionary Statements” in the press release to
which this Exhibit is attached.
Financial Terms of the Offer
SABMiller shareholders will receive 44 GBP in cash for each
SABMiller share, with a partial share alternative (PSA) available
for approximately 41% of the SABMiller shares.
Under the terms of the PSA, SABMiller shareholders may elect to
receive for each SABMiller share held (i) 0.483969 restricted
shares (the Restricted Shares) in a newly formed Belgian company
(NewCo) that will own the combined SABMiller-AB InBev business plus
(ii) 3.7788 GBP in cash. The Restricted Shares of NewCo will be
unlisted and subject to certain restrictions, including a five-year
lock-up.
NewCo will acquire SABMiller and, following the closing of that
acquisition, AB InBev will merge into NewCo.
Position of Support
On November 10, 2015 Altria’s Board of Directors authorized
Altria to provide an irrevocable undertaking to vote in favor of
the proposed transaction and to elect the PSA. Altria delivered its
irrevocable undertaking on November 11, 2015.
Financial Implications
Altria expects to exchange its approximately 27% economic and
voting interest in SABMiller for an interest that will be converted
into Restricted Shares representing an approximately 10.5% economic
and voting interest in NewCo plus approximately $2.5 billion in
cash, subject to proration.
Tax Treatment and Accounting Gain
Except for the cash consideration, Altria expects that the
transaction will result in a deferral of United States corporate
income tax.
Upon closing of the transaction, Altria estimates that it will
record a one-time pre-tax accounting gain of approximately $12
billion, or $8 billion after-tax. This estimate is based on the AB
InBev share price and GBP to USD exchange rate as of November 10,
2015, and the book value of Altria’s investment in SABMiller at
September 30, 2015. The actual gain recorded at closing may vary
significantly from this estimate based on changes to these factors
and any proration of Restricted Shares.
Proration
The number of shares that Altria receives and its corresponding
percentage ownership of NewCo at closing are subject to proration
because the PSA limits the maximum number of shares that may be
issued under the offer to 326 million NewCo Restricted Shares. To
the extent that elections for the PSA exceed this maximum number
and cannot be satisfied in full, the equity portion of all PSA
elections will be adjusted downwards on a pro rata basis. It is
possible that significant proration could (i) reduce Altria’s
projected percentage ownership of NewCo; (ii) increase the amount
of cash that Altria receives; (iii) increase the amount of the
pre-tax gain recorded by Altria; (iv) impose additional tax
liabilities on Altria; and (v) impact Altria’s ability to account
for its investment in NewCo under the equity method of
accounting.
Advisors
Credit Suisse and Perella Weinberg Partners are the financial
advisors and Wachtell, Lipton, Rosen & Katz, Macfarlanes and
McDermott Will & Emery are providing legal counsel to Altria
for the deal.
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