AB InBev criticises SABMiller board, lacks credibility – how high can they go?
The SABMiller takeover saga took another turn today as Anheuser-Busch InBev said the board's opposition to the deal lacks credibility. In response to GBP65 billion third bid, AB InBev said shareholders are being offered a price that won't be repeated anytime soon. Just another play from both sides ahead of AB InBev's October 14 deadline. One wonders how high AB InBev can still go, and at what price SABMiller's board see as fair? – Stuart Lowman
By Thomas Mulier
(Bloomberg) — Anheuser-Busch InBev NV turned up the heat on SABMiller Plc after three takeover proposals failed to get talks going, saying the board's opposition lacks credibility and shareholders are being offered a price the brewer alone won't achieve any time soon.
SABMiller's rejection isn't credible because the price of 42.15 pounds a share in cash that most stockholders would receive is 44 percent above where SABMiller was trading before speculation of a deal, Leuven, Belgium-based AB InBev said in a statement Thursday. Also, Altria Group Inc., SABMiller's largest shareholder, has urged talks over the 65.2 billion-pound ($99.7 billion) potential offer, AB InBev said.
AB InBev is trying to rally support from SABMiller shareholders for the plan, which would combine the world's two biggest brewers in one of the biggest acquisitions ever. A spokesman for SABMiller declined to comment on AB InBev's statement. SABMiller on Wednesday rejected the approach, saying it "substantially undervalues" the company.
"The board of SABMiller has refused to meaningfully engage with us," AB InBev Chief Executive Officer Carlos Brito said in the statement. "If shareholders agree that we should be in proper discussions, they should voice their views and should not allow the board of SABMiller to frustrate this process and let this opportunity slip away."
AB InBev also disputed SABMiller's contention that antitrust authorities might block the deal. The target said Wednesday when AB InBev first publicly announced the details of a potential bid that the buyer "has not yet provided comfort" to SABMiller that it can get the deal past regulatory hurdles in the U.S. and China.
"Together with its advisers, AB InBev has done significant work on regulatory matters and has identified solutions that provide a clear path to closing," the Belgian brewer said. "AB InBev has repeatedly offered to share this analysis with SABMiller and its advisers. Each time the board of SABMiller has refused to engage."
'Tough Deal'
SABMiller fell 0.3 percent to 36.22 pence at 12:05 p.m. in London. AB InBev dropped 0.6 percent to 98.03 euros.
"How long will it be before shareholders see a value over 42 pounds in the absence of an offer from AB InBev?" Brito also said.
John Maxwell, the manager of the Ivy International Core Equity Fund in Kansas City, said Wednesday there's a chance of a sweetened offer, though there's also a risk the deal falls apart.
"We're in SAB largely because we thought there was a chance that this could happen," Maxwell said in a phone interview. "It's a deal that's been a long time coming, but I think it's a tough deal to get signed."
AB InBev doesn't have "tremendous room" to raise the price, because the cost savings from this purchase won't be as big as in the brewer's past acquisitions, he said.
Anheuser-Busch InBev media statement
Anheuser-Busch InBev ("AB InBev") (Euronext: ABI) (NYSE: BUD) notes the announcement from the Board of SABMiller plc ("SABMiller") (LSE: SAB) (JSE: SAB) rejecting AB InBev's proposal of GBP 42.15 per share in cash, with a partial share alternative.
AB InBev is surprised that the Board of SABMiller (excluding the directors nominated by SABMiller's largest shareholder, Altria Group, Inc., who dissented) continues to say that this proposal "still very substantially undervalues SABMiller".
This lacks credibility because:
- The cash proposal represents a premium of approximately 44% to SABMiller's closing share price of GBP 29.34 on 14thSeptember 2015 (being the last business day prior to renewed speculation of an approach from AB InBev); and
- Altria Group, Inc., which owns 27% of SABMiller and has three representatives on the Board, has publicly stated that it supports our proposal and "urges SABMiller's board to engage promptly and constructively with AB InBev to agree on the terms of a recommended offer".
The Board of SABMiller has also referred to the highly conditional nature of the proposals, including significant regulatory hurdles in the US and China, "on which AB InBev has not yet provided comfort to SABMiller". Together with its advisers, AB InBev has done significant work on regulatory matters and has identified solutions that provide a clear path to closing. AB InBev intends to work proactively with regulators to resolve any concerns. AB InBev has repeatedly offered to share this analysis with SABMiller and its advisers. Each time the Board of SABMiller has refused to engage.
Carlos Brito, Chief Executive Officer of Anheuser-Busch InBev, said:
"Notwithstanding our good faith efforts, the Board of SABMiller has refused to meaningfully engage with us. Our proposal creates significant value for everybody. How long will it be before shareholders see a value of over GBP 42 in the absence of an offer from AB InBev? If shareholders agree that we should be in proper discussions, they should voice their views and should not allow the Board of SABMiller to frustrate this process and let this opportunity slip away."
Lazard is acting exclusively as financial adviser to AB InBev and for no one else in connection with the matters described in this announcement and is not, and will not be, responsible to anyone other than AB InBev for providing the protections afforded to clients of Lazard, or for providing advice in connection with the matters described in this announcement. For these purposes "Lazard" means Lazard Frères & Co. LLC and Lazard & Co., Limited. Lazard & Co., Limited is authorised and regulated in the United Kingdom by the Financial Conduct Authority. Neither Lazard nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard in connection with this announcement or the matters described in this announcement.
Deutsche Bank AG is authorised under German Banking Law (competent authority: European Central Bank) and, in the United Kingdom, by the Prudential Regulation Authority. It is subject to supervision by the European Central Bank and by BaFin, Germany's Federal Financial Supervisory Authority, and is subject to limited regulation in the United Kingdom by the Prudential Regulation Authority and Financial Conduct Authority.
Deutsche Bank AG, acting through its London branch ("DB"), is acting as corporate broker to AB InBev and no other person in connection with this announcement or its contents. DB will not be responsible to any person other than AB InBev for providing any of the protections afforded to clients of DB, nor for providing any advice in relation to any matter referred to herein. Without limiting a person's liability for fraud, neither DB nor any of its subsidiary undertakings, branches or affiliates nor any of its or their respective directors, officers, representatives, employees, advisers or agents owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of DB in connection with this announcement, any statement contained herein or otherwise.
In accordance with Rule 2.6(a) of the Code, AB InBev must, by not later than 5.00 p.m. on Wednesday 14 October 2015, either announce a firm intention to make an offer for SABMiller in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer for SABMiller, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline will only be extended with the consent of SABMiller and the Takeover Panel in accordance with Rule 2.6(c) of the Code.