AB InBev sub­mits of­fer to buy SABMiller for $107 bil­lion

China Daily (Canada) - - BUSINESS - By BLOOMBERG

An­heuser-Busch InBev NV sub­mit­ted its for­mal of­fer to buy SABMiller Plc for about $107 bil­lion, end­ing a month of in­tense ne­go­ti­a­tions to seal the big­gest deal in­United King­dom history.

The Bud­weiser-maker will pay 44 pounds ($66.7) a share in cash for a ma­jor­ity of the stock, the com­pa­nies said, con­firm­ing a price ac­cord an­nounced on Oc­to­ber 13.

The deal will lead to an­nual pre­tax cost syn­er­gies of at least $1.4 bil­lion, they said. To help gain an­titrust ap­proval, Mol­son Coors Brew­ing Co will ac­quire SABMiller’s 58 per­cent stake in­MillerCoors LLC for $12 bil­lion, giv­ing it full con­trol of a busi­ness that makes Coors Light.

The takeover of SABMiller will give AB InBev beer brands such as Peroni and Grolsch and cre­ate a com­pany controlling of about half of the in­dus­try’s profit — pro­vided it gets past an­titrust reg­u­la­tors.

The com­pa­nies reached a ten­ta­tive agree­ment last month af­ter weeks of hag­gling over the price, and have since been ham­mer­ing out a for­mal deal. The Bel­gian suitor must pay a fee of $3 bil­lion if it fails to get the nec­es­sary ap­provals.

“We be­lieve this com­bi­na­tion will gen­er­ate sig­nif­i­cant growth op­por­tu­ni­ties and cre­ate en­hanced value to the ben­e­fit of all stake­hold­ers,” AB InBev CEO Car­los Brito said.

AB InBev will fi­nance the cash part of the trans­ac­tion from ex­ist­ing re­sources and third-party debt. It lined up seven banks to ar­range as much as $70 bil­lion in fi­nanc­ing, sources said.

The planned sale of the stake in MillerCoors is de­signed to “promptly and proac­tively ad­dress reg­u­la­tory con­sid­er­a­tions”, the com­pa­nies said. MillerCoors rep­re­sented the big­gest an­titrust hur­dle to the merger, an­a­lysts have said, though SABMiller’s stake in China’s CR Snow may also need to be sold.

The merged com­pany will be listed in Brussels, Mex­ico and Johannesburg.

The $1.4 bil­lion of pro­jected an­nual sav­ings equates to less than 7 per­cent of SABMiller’s sales, ex­clud­ing MillerCoors. AB InBev achieved cost sav­ings rep­re­sent­ing about 16 per­cent of sales when it bought An­heuser-Busch Cos in 2008 and Mex­ico’s Modelo in 2013. To achieve those ben­e­fits, the brew­ers said they may have to “im­ple­ment cer­tain re­struc­tur­ings or re­or­ga­ni­za­tions”, more spe­cific.

To­gether, AB InBev and SABMiller will be the world’s largest con­sumer-sta­ples com­pany by earn­ings, ac­cord­ing to Ex­ane BNP Paribas an­a­lysts, who es­ti­mate the com­bined com­pany will make $25 bil­lion be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­za­tion in 2016. The en­larged brewer will have the num­ber one or two po­si­tions among 24 of the world’s 30 big­gest beer mar­kets, they es­ti­mate.

Af­ter years of spec­u­la­tion, AB InBev’s pur­suit of its near­est ri­val was has­tened by the drag of slow­ing


be­ing economies in the emerg­ing mar­kets of China and Brazil. For AB InBev CEO Brito, the com­bi­na­tion would cap a $90 bil­lion deal­mak­ing spree over the last decade, turn­ing a re­gional brewer into the undis­puted global leader.

The SABMiller pro­posal is an ac­qui­si­tion partly borne out of ne­ces­sity, with AB InBev’s growth set to slow over the next five years, es­ti­mates com­piled by Bloomberg show. A 20 per­cent drop in SABMiller shares in the months pre­ced­ing the ap­proach and the prospect of an end to cheap credit also served as a cat­a­lyst to a takeover.

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