SABMiller Board recommends revised AB InBev offer

Last week AB InBev revised the terms of its offer for SABMiller. Britain’s decision to leave the EU resulted in a fall in the pound, reducing the attractiveness of the November 2015 offer for SABMiller shareholders.  

‘Difficult decision’: SABMiller Board​

AB InBev announced its revised offer​​ on Tuesday last week, offering £45 in cash per share, up from the original £44 per share set out in November 2015.

SABMiller then suspended all integration efforts​​ with AB InBev while the Board considered the new takeover offer.

On Friday SABMiller announced that its Board will recommend the ‘cash consideration’ offer.  

SABMiller Chairman, Jan du Plessis, said: “The Board’s decision was difficult given changes in circumstances since the Board originally recommended £44 per share in cash last November. At that time we were satisfied that the 50% premium to the undisturbed share price appropriately reflected the quality of the business and its long term prospects.​

“Since then, various factors have affected the value of the offer, most importantly the impact of the Brexit vote on the value of Sterling and the re-rating of comparable companies.  ​

“This has made the Board’s decision more challenging, and we believe the final cash consideration of £45 per share to be at the lower end of the range of values considered recommendable.”​

AB InBev has welcomed the recommendation of the SABMiller Board. “​AB InBev and SABMiller have worked very closely since November last year,” ​said a statement from the company. ​

“The teams have made significant progress on the regulatory process around the world, the disposals in the US, China and Europe, as well as general integration planning and AB InBev’s bond financing program. ​

“AB InBev believes that the proposed combination represents a compelling opportunity for all SABMiller and AB InBev shareholders and continues to intend to recommend the combination to its shareholders.”​

Partial share alternative​

AB InBev’s offer comprises of an all cash offer (the £45 per share ‘cash consideration’) and a partial share alternative (PSA).

The PSA is aimed at the largest SABMiller shareholders: Altria Group and BEVCO.

The SABMiller Board has requested to the UK court that oversees the process that shareholders are divided into two groups. This would see Altria and BEVCO grouped as a separate class of shareholders.

China​

China announced conditional approval for the deal on Friday. AB InBev has agreed to sell SABMiller’s 49% stake in China Resources Snow Breweries (which produces Snow, the world’s top selling beer) to China Resources Beer.

China Resources Beer currently holds a 51% stake in China Resources Snow Breweries.

This was previously announced​​ in March, and is conditional on the completion of the AB InBev & SABMiller deal.

Following the clearances announced in the EU, South Africa and US, all pre-conditions to the proposed combination have now been satisfied.