Anheuser-Busch InBev NV said Wednesday it has reconfirmed the financial terms of its $103.95 billion takeover proposal for SABMiller PLC after carrying out due diligence on its smaller rival, and has been given another week by the U.K. Takeover Panel to make a formal bid.
The world’s largest brewer said it has also lined up financing for the deal. The proposal includes a cash offer of £44 a share, a 50% premium to SABMiller’s share price before reports of a potential takeover surfaced in mid-September.
For 41% of stock, AB InBev is offering a partial-share alternative, essentially a combination of cash and unlisted stock, translating into a lower per-share price of £39.03. The alternative was designed to appeal to SABMiller’s largest shareholders, cigarette giant Altria Group Inc. and the BevCo Ltd. investment vehicle of Colombia’s Santo Domingo family.
The agreed proposal came after several rounds of back and forth between the two companies, under which SABMiller rejected a series of incrementally stronger proposals from AB InBev as undervaluing it.
SABMiller’s board said Oct. 13 that it would unanimously recommend the proposal to shareholders should AB InBev make a formal offer. AB InBev since has been carrying out due diligence on the London-based brewer and working to line up the financing it will need to have in place for the cash component of the deal before it can announce a formal offer. Such financing typically takes the form of bridge loans that are then refinanced by longer-term loans, according to a person familiar with the talks between the two brewers.
AB InBev now has until 5 p.m. GMT on Nov. 4 to make a formal offer for its smaller rival, although the deadline can be extended again should SABMiller request it. Wednesday’s extension of the deadline is the second one, after the original deadline of Oct. 14 was extended to Oct. 28.
The two companies have also been working to come to an agreement on the sale of SABMiller’s 58% stake in the MillerCoors LLC joint venture to its partner Molson Coors Brewing Co., which holds the remaining 42%, according to the person familiar with the discussions.
“There are ongoing attempts to see if the MillerCoors deal can be done quickly,” said the person, adding that while AB InBev won’t hold up announcing a formal offer until an agreement to sell SABMiller’s stake in the U.S. joint venture is in place, the parties would like to announce such a deal when, or soon after, AB InBev announces its formal offer to buy SABMiller.
Talks between the brewers are also taking time since the pair plan to opt for the acquisition to take place via a “scheme of arrangement,” or a court-sanctioned deal that under U.K. law becomes binding on all investors providing 75% of the relevant classes of investor vote in favor of the transaction. A scheme of arrangement, unlike a tender offer, will hinge on SABMiller taking the offer to its shareholders.
To ensure that this happens, AB InBev and SABMiller are currently in the process of putting in place a detailed cooperation agreement focused on meeting the conditions that will have to be in place before SABMiller applies to the court for the scheme of arrangement, according to this person. “The legal agreements being put in place are huge and detailed,” said the person, adding that there is no guarantee the deadline won’t be extended yet again.
If a tie-up between the two beer companies is successful, it would bring AB InBev brands such as Budweiser, Corona and Stella Artois together with SABMiller’s Grolsch and Peroni, and give the combined company a major presence in the U.S., China, Europe, Africa and Latin America. Together, AB InBev and SABMiller sell more than 30% of the world’s beer.
By Saabira Chaudhuri
Source: Wall Street Journal
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