AB InBev beefs up SABMiller bid with $100bn plus offer
ANHEUSER-BUSCH (AB) InBev, the world’s biggest brewer, launched its $100 billion (R1.4 trillion) plus offer for nearest rival SABMiller yesterday and agreed to sell the latter’s stake in US venture MillerCoors to help win regulatory approval.
AB InBev, whose takeover of SABMiller would be one of the largest mergers in corporate history, said it expected to achieve $1.4bn in annual savings four years after completion of the deal, projected for the second half of 2016.
AB InBev has also reached an agreement to sell SABMiller’s 58 percent stake in US joint venture MillerCoors, as well as global rights to the Miller brand, to the venture’s other shareholder, Denverbased Molson Coors, for $12bn.
Price tag
That price tag is higher than some analysts expected, given the shallow pool of buyers, but the cost-savings target is lower, although it does come on top of the $1.05bn that SABMiller had already identified.
The merger will combine AB InBev’s Budweiser, Stella Artois and Corona brands with SABMiller’s Peroni, Grolsch and Pilsner Urquell and brew almost a third of the world’s beer, dwarfing rivals Heineken and Carlsberg.
Based on Tuesday’s closing share prices and current exchange rates, the offer is worth £70bn (R1.5trln), or $106bn.
The takeover, which SABMiller’s board provisionally accepted last month, would be the largest of a British-based firm and the fourth-biggest overall of any corporation. It will be backed by a record $75bn loan.
AB InBev is already a giant in the US, Brazil and Mexico, three of the top four markets in terms of profits.
AB InBev has reached an agreement to sell SABMiller’s 58% stake in MillerCoors to Molson Coors.
With SABMiller, it is buying into Latin American countries such as Colombia and Peru and crucially, Africa, at a time when markets such as the US are weakening as drinkers shun mainstream lagers in favour of craft brews and cocktails.
Africa, where SAB operates in 16 countries, is expected to see a sharp rise in people of legal drinking age and has a fastgrowing middle-class developing a taste for branded lagers and ales. Beer consumption there will grow by more than anywhere else over the next five years, according to industry experts Plato Logic.
AB InBev said it would seek a secondary listing and regional headquarters in Johannesburg.
Hurdles to clear
AB InBev is offering £44 per SABMiller share, along with a discounted alternative of mostly shares, designed for SABMiller’s two largest shareholders: cigarette-maker Altria and BevCo, the vehicle of Colombia’s Santo Domingo family, who together own 40.5 percent of the target company.
Those shareholders had accepted the alternative offer, the two brewers said in a joint statement. Altria said it expected to book a post-tax gain of $8bn when the deal closed.
SABMiller stock has gained almost 40 percent since speculation about an AB InBev approach emerged two months ago.
SABMiller closed 1.72 percent higher at R870.22 on the JSE.
“With today’s developments, execution is still important, but they have a bit of breathing room,” said Morningstar analyst Philip Gorham.
Analysts said the costconscious AB InBev would probably exceed its $1.4bn savings target, having done so after previous acquisitions in the US and Mexico.
“This is the estimate going in,” said Bernstein Research analyst Trevor Stirling. “This is guaranteed and there may well be potential for more.”
In SABMiller, it is buying a tighter-run operation, with pricing and distribution gains due to scale key to the deal, according to Warwick Business School professor John Colley. – Reuters