AB Inbev mulls UK tax switch to smooth £180bn merger

BREWING giant Anheuser-busch Inbev is understood to be weighing up a plan to switch its tax domicile to Britain if successful in a mooted £180 billion takeover of arch-rival SAB Miller.

The potential move comes as an investor seen as the kingmaker of any tie-up between the world’s two biggest brewers has hired investment banking heavyweights Credit Suisse and Perella Weinberg to advise it.

Altria, the American tobacco giant whose products include Marlboro cigarettes, has a 27 per cent stake in SAB Miller, and three seats on its board.

AB Inbev, which currently has its tax base in Leuven, Belgium, is understood to be talking to its advisers on how to safeguard Altira and other of SAB Miller’s big overseas shareholders from a hefty tax bill on future dividends at the combined entity. Those investors also include Colombia’s wealthy Santo Domingo family, which sits on a 14 per cent holding.

Altria currently gets millions of dollars in dividends from SAB Miller tax-free due to a US and UK treaty. But if the enlarged entity was based for tax purposes in Belgium it could face a big tax bill on future dividends.

In Belgium, foreign shareholders are subject to a withholding tax on dividends, which can mean they are sometimes taxed twice, once in that country and then in the country where they are based.

AB Inbev is understood to have sounded out Altria before it made its approach to its rival brewer. The tobacco group acquired its dominant holding in 2002 when its predecessor company, Philip Morris, sold the US beer-marker Miller to South African Breweries.

It marked a step change in SAB’S global expansion, which had previously been weighted towards emerging markets. A key rationale for the latest merger is seen as giving AB Inbev greater exposure to those fast-growing emerging markets compared with the mature markets of western Europe and North America.

Last week, AB Inbev confirmed an offer approach – without any price at this stage – to SAB Miller, respectively the biggest and second biggest brewers in the world.

If the deal went through it would create an industry leviathan that makes one in every three beers sold worldwide, including brands such as AB Inbev’s Stella Artois, Corona and Budweiser, and SAB Miller’s Peroni and Grolsch.

The suitor has to make a firm offer by 14 October or walk away under City of London takeover rules. It comes as the target company is also understood to have hired its own banking advisers on the deal, American investment banking majors Morgan Stanley and JP Morgan.

One analyst commented: “It looks all to play for currently. And it is probable a lot will depend on the structuring of the deal as to whether any firm offer gets an SAB Miller board recommendation.

“I would think there would have to be a heavy shares component for the major SAB institutional shareholders to be keen as they would likely want to share the upside of a massive new industry player going forward. They would also want to avoid big capital gains tax bills.”

Last year Altria hinted it might be interested in selling part or all of its stake, saying it was “doing a lot of analysis” on potential consolidation of the worldwide beer industry. It is believed Altria would push for a seat on the board of any merged entity.

It looks all to play for. It is probable a lot will depend on the structuring of the deal