Cheers to a piece of history as AB InBev swallows SAB

FRIDAY marked the end of an era on the JSE as its secondoldest listing and second-largest listed share ceased trading and SABMiller, one of South Africa’s most successful companies, was absorbed into the world’s largest brewer, AB InBev.

Only DRD Gold has been listed on the JSE for longer, having begun trading in 1895.

Founded in 1895 and listing in 1897, South African Breweries was the country’s third-largest brewer by 1955 — but had the fire-power to buy its two larger competitors, Ohlsson’s and Chandlers Union breweries, to snare 98% market share by the second half of the 20th century.

During the ’70s SAB joined the trend of JSE-listed entities such as Anglo American by accumulating diverse interests and income streams, owning everything from furniture makers to food brands, before the ’90s heralded a change in strategy and a honed focus on expansion.

After fighting off incursions into its South African territory by the likes of the ill-fated Luyt Breweries, and after a masterstroke deal with Coca-Cola to bottle the global giant’s beverages for the local market in 1977, SAB began to look offshore for opportunities, notably beginning with the purchase of Hungarian brewer Dreher in 1993.

In the next decade SAB bought 10 breweries in six countries. By 2001 nearly half of its turnover came from foreign interests.

Under vaunted dealmaker CEO Graham Mackay from 1992, SAB entered the key markets of India, Central America and Africa before buying the US’s second-largest brewer, Miller, in 2002.

Later acquisitions included Peroni in 2003, Grolsch in 2008 and the merger of Miller with Molson Coors in the same year and Foster’s in 2011, until SABMiller was the world’s secondlargest brewer.

By 1994 SAB had also bought 49% of China’s second-largest brewer and Snow, the Chinese mainland’s largest beer brand and the world’s most sold beer, although this will now be returned to Chinese ownership after a sale as AB InBev management sorts out regional competitive conflicts.

Under Mackay and with a steely gaze on global expansion, SAB moved its primary listing to the London Stock Exchange in 1999, with its series of deals attracting foreign investors who poured into the stock.

Since its listing in London, the share has returned nearly 1 500%.

SABMiller’s shareholder register in its final week of trading on the JSE showed that the majority of the equity was in the hands of foreign entities.

Behind the Altria Group, which held just over a quarter of the group, and Bevco International, with just under 14%, came a dizzying array of the world’s largest banks and asset managers.

Even the state of Texas held 0.04% of the equity.

SABMiller, which on its last day of trading employed more than 70 000 workers, sold nearly 15 000 bottles per minute around the world.

According to Vestact analyst Sasha Naryshkine, the JSE is not losing anything with the demise of SABMiller as a staple component of the index’s top 40 shares.

Firstly, Naryshkine said, most investors would take the option of cash, which would mean a distribution to holders of the JSE-listed share of some R215billion, given the buyout price.

And the JSE has gained the listing of AB InBev, which has a market capitalisation of nearly R3-trillion and provides access to beer markets around the world.

But will SABMiller shareholders happily buy straight back into the merged entity as a proxy for continued performance in the SABMiller vein?

“It depends on what kind of investor you are, but if you’re an institutional investor with mandates to not go over a certain percentage of a business, you now have this avenue to still be invested in the same business but even bigger. It’s a much larger beast,” he said.

“I don’t know why people would think AB InBev’s management wouldn’t be able to sweat the business’s assets as much as SAB’s management did. From what I hear they’re even more ruthless and have probably borrowed at very low rates to buy SABMiller at a significant premium, with a long-term view on developing the beer market across particularly Africa.”

Holders of SABMiller shares have enjoyed a 50% return over the past year, since the first offer was announced, which would mean many shareholders will happily cash out.

“Regardless of the noise around dissenting shareholders, when it came time to take the money shareholders overwhelmingly voted in favour,” said Naryshkine.

You have this avenue to be invested in the same business but even bigger