SABMiller has agreed to sell itself to Anheuser-Busch InBev for $104bn (£68bn), in a deal that will be the biggest ever takeover of a British company.
The takeover is also one of the top five deals in corporate history, and will create a brewing empire that will make about one-third of the world’s beer. AB InBev is already the world’s biggest brewer, and SABMiller is its closest rival.
The boards of the two companies said they had reached agreement “in principle” on the key terms of a “possible recommended offer” after SABMiller rejected repeated approaches by AB InBev over the past month.
London-listed SABMiller said AB InBev – which brews Budweiser and Stella Artois – is proposing to pay £44 a share in cash. It also offered a partial share alternative structure for 41% of the company owned by SABMiller’s two biggest shareholders – Altria, the maker of Philip Morris cigarettes, and BevCo, owned by Colombia’s billionaire Santo Domingo brewing family.
The £44 cash offer values the maker of Peroni and Grolsch at about 50% more than its value on 14 September, before news of AB InBev’s interest leaked. If all the shares were sold for that price it would value SABMiller at about £71bn but the £39.03 part-share alternative, devised for tax reasons, brings the valuation down to £68bn.
SABMiller shares rose 8.6% to £39.31.
AB InBev had until 5pm on 14 October to lodge a formal bid after having five previous proposals turned down, including a £43.50-a-share approach on Monday. SABMiller has asked the takeover panel for an extension to that deadline so the two sides can work out details. The new deadline for AB InBev to make a firm offer is 28 October.
SABMiller has negotiated a $3bn break fee payable by AB InBev if the deal falls through because of competition hurdles or opposition by AB InBev shareholders.
The agreement in principle appears to settle a month of manoeuvres over a long-rumoured deal between the two companies. SABMiller rejected three approaches of £38, £40 and £42 a share in private before AB InBev tried to force the board’s hand by going public with a £42.15 proposal last week.
AB InBev’s chief executive, Carlos Brito, complained that SABMiller had refused to enter substantive talks and urged shareholders to put pressure on the board. SABMiller, led by chairman Jan du Plessis, said AB InBev’s approaches were opportunistic and “very substantially” undervalued the company.
If completed, the takeover will secure AB InBev a target it has long been eyeing. Backed by Brazil’s richest man, the financier Jorge Paulo Lemann, the Belgian-Brazilian brewer has expanded aggressively through big deals including combining with Interbrew, the maker of Stella Artois, in 2004 and buying the US Budweiser brewer Anheuser-Busch four years later.
Brito said AB InBev decided to make a move after carrying out research on the beer market in Africa, where SABMiller, founded in Johannesburg in 1895, makes about 28% of its revenue. AB InBev also learnt that Altria and BevCo would be receptive to an offer, he said.
AB InBev’s approach split the two big shareholders at first. Altria, with a 27% stake, told SABMiller to enter talks last week but the Santo Domingos, with 14% of the shares, sided with the board in rejecting AB InBev’s earlier approaches.
Brito said last week that the deal would be good for consumers because AB InBev would be able to sell its brands in Africa and other markets where SABMiller has big operations. But AB InBev has a reputation for ruthless cost-cutting and its US sales have been under pressure partly because beer drinkers have shunned big brands in favour of craft beer.
The US Justice Department is investigating claims that AB InBev is seeking to curb competition in the beer market by buying distributors, making it harder for the craft brewers to get their products into stores, Reuters reported.
This article was written by Sean Farrell, for theguardian.com on Tuesday 13th October 2015 09.04 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010