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SABMiller rejects $100bn takeover approach from AB InBev AB InBev chief urges SABMiller shareholders to push for fresh bid talks
(about 4 hours later)
SABMiller has rejected a $100bn (£65bn) takeover proposal from Anheuser-Busch InBev after the world’s biggest brewer went public with an increased approach for the UK company. The chief executive of Anheuser-Busch InBev has urged SABMiller shareholders to telephone the UK brewer’s chairman to press him to enter serious talks after it turned down a $100bn (£65bn) takeover proposal from the world’s biggest beermaker.
The world’s second-biggest brewer said its board met on Wednesday and decided unanimously to rebuff AB InBev’s approach. Altria, SABMiller’s biggest shareholder, which backs AB InBev’s proposal, did not take part in the vote. Carlos Brito said SABMiller’s rejection of three bid proposals meant its shareholders risked losing out on a valuation that could take the company many years to achieve on its own.
With a week to go until a deadline for a firm offer, the Belgian maker of Stella Artois and Budweiser sought to apply pressure to SABMiller by announcing it was willing to pay £42.15 a share in cash for the British brewer, which owns Grolsch, Peroni and Coors. AB InBev, the Belgian-based owner of Budweiser and Stella Artois, went public with its proposed bid in an attempt to force SABMiller’s hand with a week to go until the deadline for a firm offer. If a deal went ahead, it would be the biggest takeover of a UK company, creating a brewing giant producing a third of the world’s beer.
That price would value SABMiller at £68bn. However, AB InBev also proposed a part-share offer aimed at SABMiller’s biggest shareholders, owning 41% of the company, worth 11% less than the proposed offer to other investors, making the potential deal worth £65bn. AB InBev said it was willing to pay £42.15 a share in cash for SABMiller, which makes Grolsch, Peroni and Coors. It had previously made private approaches to the board, chaired by Jan du Plessis, suggesting a deal at £38 a share and £40 a share.
The latest proposal would value SABMiller at £68bn. However, AB InBev also proposed a part-share offer aimed at SABMiller’s biggest shareholders, which own 41% of the company. It would be worth 11% less than the proposed offer to other investors, making the potential deal worth £65bn.
The two major shareholders, Altria of the US and BevCo, owned by Colombia’s Santo Domingo family, appear to be split on AB InBev’s approach.
Altria announced public support for the proposal and told SABMiller’s board to work on a deal. But Brito was forced to backtrack on a claim made early on Wednesday that he expected BevCo to back the proposal. He said he still hoped to get the support of BevCo, which owns almost 14%.
Brito did not rule out making a hostile bid before the 14 October takeover rules deadline but he said he still hoped to get SABMiller’s board to support an offer.
He said: “We still want to get the recommended deal but now it’s time for shareholders to pressure the board. If they think they are not going to see this £42.15 any time soon if this deal falls apart because of a lack of engagement they should call the chairman.
“The board is the biggest risk in this transaction and that is why it’s important for shareholders to voice their opinions because time is running out.”
SAB Miller said its board met on Wednesday and decided unanimously to rebuff AB InBev’s approach. Representatives of Altria, with 27% of the shares did not take part in the vote.
SABMiller said: “The board, excluding the directors nominated by Altria Group Inc, has unanimously rejected the £42.15 proposal as it still very substantially undervalues SABMiller, its unique and unmatched footprint, and its standalone prospects.”SABMiller said: “The board, excluding the directors nominated by Altria Group Inc, has unanimously rejected the £42.15 proposal as it still very substantially undervalues SABMiller, its unique and unmatched footprint, and its standalone prospects.”
The rejection sets the scene for further manoeuvring between the companies after AB InBev said it had the support of SABMiller’s biggest shareholder, Altria of the US, for the proposed offer. It was forced to backtrack on a claim that it expected SABMiller’s second-largest shareholder, BevCo, to back the proposal. The rejection of the proposal sets the scene for further manoeuvring between the companies and shareholders. Brito said the part-share offer was devised “with and for” Altria and BevCo by an unnamed shareholder of AB InBev.
If the deal goes ahead, it would be the biggest ever takeover of a UK company and would create a brewing giant producing a third of the world’s beer.
SABMiller rejected the latest proposal despite its biggest shareholder, Altria, which owns 27%, saying it supported the proposed increase. SABMiller’s board had already rejected the suggestion of a £42 offer made by AB InBev’s chief executive, Carlos Brito, on 5 October.
Altria told SABMiller’s board to get on with talks to finalise a recommended offer. But Colombia’s Santo Domingo family, who own almost 14% of SABMiller through their BevCo company, has not backed the approach, contrary to Brito’s claim that he expected their support.
In a statement to the stock exchange, AB InBev said: “AB InBev wishes to clarify that it does not currently have the support of BevCo Ltd. for the proposed combination.”
Related: SABMiller 'set to reject' AB InBev offerRelated: SABMiller 'set to reject' AB InBev offer
The proposed offer is the the third approach AB Inbev has made for SABMiller, having privately proposed bids of £38 a share and £40 a share in cash. The latest approach is 44% more than SABMiller’s closing share price on 14 September, the day before rumours of an impending approach reached the market. AB InBev’s latest proposal is 44% more than SABMiller’s closing share price the day before rumours of an impending approach reached the market last month.
SABMiller shares were up 1% to £36.60 after the company rejected the proposed offer.SABMiller shares were up 1% to £36.60 after the company rejected the proposed offer.
AB InBev said it was disappointed that SABMiller’s board rejected its previous offers without meaningful discussion and that it had made its latest approach public to give shareholders in the UK brewer a chance to consider it. SABMiller announced on 15 September that AB InBev had approached it about a takeover to create a company worth about $280bn. Under UK takeover rules, AB InBev was given 28 days to make a firm offer or walk away unless SABMiller asked for the deadline to be extended.
SABMiller announced on 15 September that AB InBev had approached it about a takeover to create a company worth about $280bn. Under UK takeover rules, AB InBev was given until 14 October to make a firm offer or walk away unless SABMiller asked for the deadline to be extended. Brito said his company had considered a bid for SABMiller on and off for years but that in the past year it had done detailed analysis of the beer market in Africa, where SAB Miller is the dominant brewer. It had also learnt that Altria and BevCo might be receptive to an approach, he said.
Brito said: “We had interaction with their board and chairman on a private basis. We were disappointed that they rejected both offers. There was no meaningful engagement with them which is why we thought it was time for the shareholders to get to know what was being discussed.” The combined company would be able to sell more brands in different countries, he said. Apart from the US and China, there is little overlap between the two companies’ markets and the deal would be about expansion rather than cost cuts, Brito added.
AB InBev said it had devised an alternative to its cash offer, available to all shareholders but intended for Altria and BevCo, for payment of £2.37 a share in cash and the rest in a new class of AB InBev shares. SABMiller said this option was worth £37.49 a share and that the shares would be untraded and convertible into ordinary AB InBev shares after five years. AB InBev said the alternative to its cash offer, available to all shareholders but intended for Altria and BevCo, would pay £2.37 a share in cash and the rest in a new class of AB InBev shares. SABMiller said this option was worth £37.49 a share and that the shares would be untraded and convertible into ordinary AB InBev shares after five years.
RBC Capital Markets analyst James Edwardes Jones said he believed both companies wanted to strike a deal and that price was the sticking point. “This is not, in our view, intended as ABI’s concluding proposal but it is likely to put pressure on SAB’s management to engage (witness Altria’s comments) and at least there is now a formal proposition to discuss,” he said.RBC Capital Markets analyst James Edwardes Jones said he believed both companies wanted to strike a deal and that price was the sticking point. “This is not, in our view, intended as ABI’s concluding proposal but it is likely to put pressure on SAB’s management to engage (witness Altria’s comments) and at least there is now a formal proposition to discuss,” he said.