With the lager saga already dragging on for weeks, analysts say InBev may have to increase its offer to around 45 pounds to get the deal done at a time when the global players are looking to consolidate. And Altria Group Inc, SABMiller’s largest shareholder with a 27 percent stake, said it supported the latest proposal.
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Read also: $250bn brewing behemoth: AB InBev targets SABMiller, shares rocket 23%.
The deal’s structure has been a key point in negotiations. The statement from the from claimed it anticipated that most SABMiller shareholders would accept the higher cash offer.
The PIC, a state-owned manager of government worker pension funds, owns 3.14 percent of SABMiller.
The company said in a statement it had made two prior offers for SABMiller with the second one at 40 pounds per share.
A-B InBev CEO Carlos Brito said in a conference call with reporters Wednesday that he was disappointed that the British company’s board rejected its bid to make the world’s “first truly global beer company”. It will be interesting to see how high AB InBev is willing to go.
SABMiller’s board of directors, excluding directors nominated by Altria Group, its largest shareholder, also quickly rejected the latest proposal, saying in a news release that the revised bid “still very substantially undervalues SABMiller, its unique and unmatched footprint, and its stand-alone prospects”. Anheuser Busch climbed about 2 percent to 99.96 euros in Brussels.
The cash transaction will be financed through internal resources of AB InBev and a third party debt.
It said: ‘Altria urges SABMiller’s board to engage promptly and constructively with AB InBev to agree on the terms of a recommended offer’.
SABMiller didn’t immediately respond to requests for comment.
However, SABMiller said its board would meet to formally consider AB InBev’s latest proposal as soon as practicable before making an announcement.
“The partial share alternative was designed with and for them”, he added.
Belgium-based AB InBev – the world’s biggest beer firm – includes Budweiser and Stella Artois in its stable of beers.
The proposed merger would combine the two largest beer companies in the USA that would reportedly control over 70% of the market and generate almost $250 billion in annual revenues. Sales rose by just 0.5% in the U.S. a year ago when measured by volume, according to the Brewers Association. Chinese authorities could require the brewer to exit SABMiller’s joint venture with China Resources Enterprise Ltd., which has 23% of the market and produces the top-selling Snow brand.
In a further indication of the activity in the emerging markets drinks industry, Diageo said Wednesday it had bought Heineken’s 20 percent stake in Guinness Ghana Breweries, taking its shareholding there to 72.2 percent.
“Given the bounce in the share price today, we downgrade our buy recommendation to hold”. This is in line with company laws governing the United Kingdom, where SABMiller is headquartered and where it has a listing on the London Stock Exchange.
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A deal between AB InBev and SABMiller has been rumored for years, and a few analysts have described it as the last major piece of consolidation that remains in the beer industry.
