Daily Management Review

AB InBev increased purchase price for SABMiller


08/01/2016


Board of Directors of brewer SABMiller approved a purchase proposal with increased costs from Anheuser-Busch (AB) InBev. Thus, the main obstacle on the way to merger of the two brewing giants has been overcome. Earlier last week, AB InBev sent to SABMiller an offer with the new conditions to eliminate the shareholders' concerns around loss of the transaction’s value after fall of the pound sterling in relation to the UK referendum.



Marcin Szala
Marcin Szala
AB InBev announced its readiness to pay 45 pounds for SABMiller’s share instead of 44 pounds, as was agreed in 2015. In other words, the entire company-competitor is now estimated at 79 billion pounds ($ 103.6 billion), rather than 70 billion pounds ($ 106 billion at exchange rate at the time of the price offer).

In addition, on Friday, 29 July, Chinese antitrust regulators also approved the merger of the two companies.

The situation surrounding the AB InBev - SABMiller deal illustrates how Brexit impact on global business. Fall of the British pound by more than 10% against the dollar affected SABMiller’s value assessment when paying cash. As a result, the amount turned out much lower than the alternative payment in cash and shares (it is stipulated in the deal for Altria and Colombian family Santo Domingo, owning approximately 41% SABMiller), since AB Inbev’s shares are denominated in euro. Note that initially it was assumed that the cash payment would provide the sellers with a premium. This situation caused discontent of shareholders and certain members of the board of directors of SABMiller.

US Justice Department has already authorized the merger of AB InBev and SABMiller.

By raising the price offer for SABMiller, AB InBev has shown how precious the deal is. The merger would allow the company to enter the fast growing African beer market against background of the difficulties with Bud Light and Budweiser’s sales on the primary markets - the US and Brazil.

SABMiller’s Board of Directors unanimously voted for the new proposal from the competitor. The companies have already covered many steps to merge and obtain approval of the regulators, so to abandon the transaction would be at least incompetent. In addition, the Board noted that two of the largest co-owners of the company - Altria and the Santo Domingo family - should be regarded as a separate class of shareholders and therefore vote separately. Thus, size of the stake, required to block the deal, has been reduced to 15% from 25%, estimated analysts of Stifel Nicolaus & Co.

Now the shareholders of both brewers will have to vote on the deal, which is expected to be closed before the end of 2016. 

source: wsj.com






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