SABMiller, the world’s second-largest beer company, this morning rejected a third takeover bid, worth $104 billion, from the larger Anheuser-Busch InBev saying that the offer “substantially undervalues” the company.
After a meeting, SABMiller’s 16-member board, excluding three directors nominated by U.S. tobacco company Altria Group Inc., its largest shareholder, formally considered and rejected A-B InBev’s third proposal of 42.15 pounds per share in cash (USD $64.49). Two earlier offers, made privately and valued at 40 pounds and 38 pounds, respectively, had already been rejected by the board, the company said.
“SABMiller is the crown jewel of the global brewing industry, uniquely positioned to continue to generate decades of standalone future volume and value growth for all SABMiller shareholders from highly attractive markets,” Jan du Plessis, Chairman of SABMiller said in a statement. “A-B InBev needs SABMiller but has made opportunistic and highly conditional proposals, elements of which have been deliberately designed to be unattractive to many of our shareholders. A-B InBev is very substantially undervaluing SABMiller.”
In its own statement, A-B InBev called the third offer “compelling,” describing it as one that would be “highly attractive to SABMiller shareholders.” According to the company, the bid represents a premium of approximately 44 percent to SABMiller’s closing share price of 29.34 pounds on September 14.
“The revised proposal is designed to enable a compelling cash offer to be made to SABMiller’s public shareholders and to provide a continuing attractive investment for Altria Group, Inc. and BevCo Ltd. (who together hold approximately 41 percent of the SABMiller shares), which A-B InBev believes will satisfy their financial requirements,” the company said in a release. “Importantly, the partial share alternative enables appropriate financing to be achieved and supports the cash offer at a higher price than A-B InBev would otherwise be able to offer.”
News of A-B InBev’s plans to acquire SABMiller were officially announced in mid-September. In recent weeks, A-B InBev had been working with a number of international banks to line up as much as $70 billion in financing for the deal.
A merger would create the world’s largest beer company, one that would produce nearly a third of all beer consumed globally. As a combined entity, the beverage giant would generate revenues of USD $64 billion and EBITDA of USD $24 billion, A-B InBev said in a statement.
“We have the highest respect for SABMiller, its employees and its leadership, and believe that a combination of our two great companies would build the first truly global beer company,” Carlos Brito, CEO of A-B InBev said in the statement. “Both companies have deep roots in some of the most historic beer cultures around the world and share a strong passion for brewing as well as a deep seated tradition of quality. By bringing together our rich heritage, brands and people we would provide more opportunities for consumers to taste and enjoy the world’s best beers.”
The third proposal included a “partial share alternative,” which comprises up to 326 million shares and is available for approximately 41 percent of the SABMiller shares. Those shares, A-B InBev said, would take the form of a separate class of restricted shares and:
- Remain unlisted and not admitted to trading on any stock exchange;
- Subject to a five-year lock-up from closing;
- Convertible into A-B InBev ordinary shares on a one for one basis after the end of that five year period; and
- Rank equally with A-B InBev ordinary shares with regards to dividends and voting rights.
All formal offers require the approval of Altria and SABMiller’s second-largest shareholder, the family of Colombian investor Santo Domingo, who collectively own about 41 percent of SABMiller shares.
If accepted, a merger would trigger a worldwide antitrust examination. In the U.S., SABMiller would need to divest its stake in MillerCoors, a joint venture with Molson Coors, and in China, A-B would likely need to find a new owner for SABMiller’s CR Snow brand.
SABMiller cited regulatory concerns in its rejection of the three proposals, calling the offers “highly conditional.”
In its statement, A-B InBev acknowledged antitrust concerns, saying that the two companies’ geographic footprints were “largely complementary on a continental and regional basis,” and that it would work with “relevant authorities in seeking to bring all potential regulatory reviews to a timely and appropriate resolution.”
“In the U.S. and China, in particular, the company would seek to resolve any regulatory or contractual considerations promptly and proactively,” it said. “Similarly, in South Africa and other jurisdictions, A-B InBev would work with SABMiller to address any regulatory requirements.”
SABMiller sold 276 million barrels of beer, soft drinks and other alcoholic beverages in the year ended March 31, 2015, generating revenues of more than $26 billion, according to the company. A-B InBev sold more than 390 million barrels of beer in 2014.
Statements from both companies, with additional details concerning the takeover proposals, are linked below.
A-B InBev also established the website globalbrewer.com, which features a video message from CEO Carlos Brito as well as other statements relating to the “proposal to build the first truly global beer company.”
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