SABMiller sold for $104 billion

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DELTA Beverages Zimbabwe’s parent company, SABMiller has agreed to sell itself to its closest rival Anheuser-Busch InBev for $104bn (£68bn), in a record takeover deal for one of the biggest multinational firms.

The London-headquartered British company owns 40 percent of Delta Beverages.

The takeover is one of the top five deals in corporate history set to create a brewing empire that will make about one-third of the world’s beer, Bloomberg reported yesterday.

Online media reported by 9AM SABMiller shares had shot up by almost 11 percent yesterday to R811 on the Johannesburg Stock Exchange after it was announced that AB InBev had agreed to buy the firm, while in London the primary listing increased by 9.3 percent.

AB InBev, headquartered in Leuven, Belgium, is already the world’s biggest brewer, controlling 25 percent global market share.

The boards of the two companies are said to have reached an agreement “in principle” on the key terms of a “possible recommended offer” after SABMiller had rejected repeated approaches by AB InBev over the past month.

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 percent 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 percent more than its value on September 14, before news of AB InBev’s interest leaked. If all the shares were sold for that price it would value SABMiller at about £71 billion but the £39.03 part-share alternative, devised for tax reasons, brings the valuation down to £68 billion.

AB InBev has until 5pm today to lodge a formal bid after having five previous proposals turned down, including a £43.50-a-share approach on Monday, wrote Reuters.

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 October 28.

SABMiller has negotiated a $3 billion 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. Led by chairman Jan du Plessis, the British firm 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 percent 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 percent stake, told SABMiller to enter talks last week but the Santo Domingos, with 14 percent 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, reported Reuters.