SABMiller Board Expected to Discuss AB InBev Offer
July 20 2016 - 01:14PM
Dow Jones News
By Tripp Mickle
SABMiller PLC's board on Wednesday is expected to discuss the
possibility of seeking new terms from Anheuser-Busch InBev NV on
its roughly $108 billion takeover, according to a person familiar
with the matter.
The board meeting was already on the calendar ahead of the
company's annual shareholder gathering, which is scheduled for
Thursday. It comes as SABMiller's deal faces increased pressure
from investors who have watched the weakening pound disrupt the
terms of the transaction.
Hedge funds including Davidson Kempner Capital Management and
Elliott Management Corp. have bought shares in SABMiller in recent
weeks. They have reported stock positions in SABMiller following
last month's vote by the United Kingdom to exit the European Union,
which sent the pound plunging.
The falling pound has raised questions with analysts about
whether AB InBev might be pressured to renegotiate its roughly $108
billion offer for SABMiller.
When the deal was struck in November, AB InBev agreed to pay
GBP44 a share for a majority of SABMiller. For 41.6% of stock, AB
InBev created a partial-share alternative, essentially a
combination of cash and unlisted stock, that translated into a
lower per-share price of GBP41.85. The partial-share plan was
designed to allow SABMiller's largest shareholders, Altria Group
Inc. and the Santo Domingo family, to retain holdings and board
seats.
However, because AB InBev's stock trades in euros -- which has
risen 8.4% over the past month against the pound -- those shares
have become more valuable. As of July 18, the partial-share
alternative was worth about GBP49.63 ($65.47) or 13% more than the
cash offer, according to Stifel Nicolaus & Co.
The difference between the all-cash and partial-share offers
increases the likelihood that other shareholders besides Altria and
the Santo Domingo family would opt for the more valuable
alternative. It also raises the possibility that institutional
investors will call on AB InBev to sweeten the cash offer.
It is far from guaranteed SABMiller will seek better terms for a
deal that already has been signed -- or that AB InBev would agree
to sweeten its offer. AB InBev has said it expects to close the
deal in the second half of the year. It is still awaiting
regulatory approval from the U.S. and China; regulators in Europe
and South Africa have already signed off on the transaction.
Most institutional investors aren't in position to opt for the
partial-share alternative because the unlisted shares can't be sold
for five years. That would create a problem for funds that need to
be able to liquidate assets if investors want cash returned.
The partial-share alternative's rising value also poses a risk
for Altria. As part of the deal, the U.S. tobacco company would own
about 10.5% and have two seats on the board of a combined AB
InBev-SABMiller. That would allow it to continue to record income
from the beer business through equity accounting practices, which
contributes to its bottom line.
But if other SABMiller shareholders opted to take the
partial-share alternative, reducing Altria's share to 9% and
costing it a seat on the combined company's board, CLSA tobacco
analyst Michael Lavery said Altria might lose its ability to record
income from the beer business.
Write to Tripp Mickle at Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
July 20, 2016 12:59 ET (16:59 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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