‘Deal is a potential windfall’

THE PROPOSED takeover of SABMiller by larger rival brewer Anheuser-Busch (AB) InBev yesterday could provide South Africa with a much-needed windfall to build reserves, economists said yesterday.

Annabel Bishop, the chief economist at Investec in South Africa, said potentially R70 billion could flow into the country.

“However, the Reserve Bank may also choose to neutralise the inflows as it has done historically in this type of transaction by absorbing the hard currency to build reserves, although it would be best for South Africa if a partial inflow were allowed to stabilise the rand closer to its purchasing-power parity value,” she added.

Chris Hart, a global investment strategist on wealth and investment at Standard Bank, said the exact mechanisms of the deal still had to be tabled.

“I imagine the deal would be concluded within the next three to four months. My sense is that this could be a mini-windfall for the Treasury but not a game changer.”

Attempts to reach Phumza Macanda, a spokeswoman for the Treasury, were unsuccessful last night. The extent of the proposed takeover of SABMiller also looked set to give authorities a myriad of factors to consider before it goes through.

At yesterday’s exchange rates, the price tag for SABMiller was at about R1.4 trillion, just about eclipsing South Africa’s current government expenditure budget, which is R1.35 trillion.

South Africa’s net gold and foreign exchange reserves dipped to $41.153 billion in September from $41.244 billion in August.

Gold and foreign exchange reserves help a country support its liabilities and meet foreign loan commitments. Any opportunity to build them will be a welcome development, especially as Finance Minister Nhlanhla Nene puts finishing touches on his medium-term budget policy statement for October 21.

Stocks on the JSE firmed yesterday, led by SABMiller whose shares jumped after accepting the takeover offer from AB InBev, which will create a company making almost a third of the world’s beer.

The rand, however, weakened against the dollar in globally risk-averse trade and after the Treasury was reported by Reuters as saying it could try to stop the SABMiller deal should it lead to erosion of the tax base.

JSE-listed shares in SABMiller ended 9.97 percent higher at a record close of R805, having gained about 30 percent over the past month.

“This deal enhances Anheuser’s reach because SABMiller has a much bigger reach and for SABMiller I think they just got the right price,” Bruno Van Eck, a trader at Thebe Stockbroking, said.

The rand retreated to R13.4475 by 5.44pm, down 0.9 percent on the day, after touching a session high of R13.31 in earlier trade.

It weakened after the Treasury said it would look at the possible impact on the capital account as well as on the tax base from the $106bn takeover of SABMiller.

“We did see the rand react to that news (because) should the deal go through, it’s likely to generate quite a bit of inflows which would be rand supportive,” ETM market analyst Ricardo Da Camara said.

The Public Investment Corporation (PIC), a 3.14 percent shareholder in SABMiller, was still insisting yesterday that the new entity resulting from the merger be listed on the JSE to ensure all SABMiller shareholders benefit from the future growth of the company.

“It is also our preference that the receipt of cash and swapping for shares of the new entity on the JSE is synchronised. It is also important to the PIC that jobs at SABMiller in South Africa will be preserved.”

The asset manager, which administers R1.8bn on behalf of government employees, said it would be engaging with both AB InBev and SABMiller regarding the finer details of the listing, as well as ensuring the rights of minority shareholders were taken into consideration during and after the transaction.

Sources close to the JSE said yesterday it was understood AB InBev was considering a secondary listing on the JSE for the new merged entity.

The biggest company listed on the JSE is British American Tobacco followed by SABMiller, which makes up 10.2 percent of the total market cap on the JSE.