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SABMiller managers in line for large payouts after any AB InBev takeover

September 18, 2015
Consumer Packaged Goods

Around 1,700 top managers at brewer SABMiller could be in line for payouts averaging $1m (£650,000) each if the takeover of the business behind Grolsch and Peroni by Anheuser-Busch InBev goes ahead.

Analysts at stockbroking firm Bernstein have calculated that share schemes put in place by the London-listed brewer will be worth more than $1.8bn (£1.1bn) in total if the acquisition-hungry AB InBev pays around £39 a share for its smaller rival.

SABMiller’s chief executive, Alan Clark, who took the helm two years ago and has worked for the brewer for 25 years, could receive substantially more. His options could be worth at least £40m.

Shares in SABMiller, which has a long heritage in South Africa dating back to 1886, closed at £36.20 on Thursday, holding on to the 20% gains scored the previous day when AB InBev was forced to admit it had approached its smaller rival about a tie-up worth $275bn. At current prices SAB is worth around £60bn.

The prospect of the deal – the biggest takeover of the year to create a company being dubbed “MegaBrew” – has already been igniting the City. Big multimillion-pound fees are on offer for investment bankers working for SABMiller and Belgian-headquartered AB InBev.

However, the focus has also begun to turn to the value of shares held by SABMiller staff, many of whom are outside the boardroom and based in South Africa.

Trevor Stirling, analyst at Bernstein, calculated that if share schemes put in place at SABMiller were bought out by AB InBev at £39 a share, staff stood to receive a combined $1.8bn. “We do not know the exact shape of the payout but we believe that there would be substantial multimillion-dollar payouts to level 2 managers,” said Stirling.

While AB InBev might try to put new five-year packages in place to stop them walking away, Stirling wrote: “We suspect very strongly that these newly affluent South Africans would not stick around to see what the culture of MegaBrew would be plus run the risk of being terminated during the five-year period and losing all the unvested stock.”

This might spark AB InBev – brewer of Stella Artois and Budweiser – to sell off some operations in parts of Africa to avoid the risk of staff defections. Other parts of the business would need to be broken off to calm concerns about monopoly positions in some countries. SAB’s 58% stake in MillersCoors is expected to be sold off to Molson Coors, whose share price jumped in anticipation of a deal.

The staff retention dilemma, however, may be less of an issue for those employees whose shares have already been released to them but remain inside the scheme because they have decided not to sell the stock.

A deal could take months to complete, if it takes place at all. AB InBev – an acquisitive business run by Brazilian Carlos Brito – has until mid-October to make a formal offer under UK takeover rules, and it is not clear if he and South African Clark have held any formal discussions.

Stirling expects the transaction, the subject of City gossip for many months, to complete. “This looks like the beginning of the end game in the formation of MegaBrew,” he said.

SABMiller, which employs 68,000 people around the world, refused to comment on the calculations.

It is not clear if Clark would take any role in the enlarged company. But the South African could have shares worth around £40m, including from options granted over 10 years ago, at the price of around £39 per share expected by the City. In 2015 Clark received £7m, including £4.4m of long-term incentive plans on top of his £1.1m salary.

AB InBev is an amalgamation of businesses. Created in in 2008 by the merger of Anheuser-Busch, the American maker of Budweiser, and InBev, which itself was an amalgamation of Belgium’s Interbrew, the owner of Stella Artois, and AmBev, the Brazilian maker of Brahma. It is controlled in turn by 3G Capital, a private equity fund run by a group of Brazilian investors which has been behind takeovers of Burger King, Heinz and Kraft Foods.

The fund has pounced following a 15% fall in SABMiller’s share price since August, when worries about the health of the Chinese economy – where it has large operations – knocked investor sentiment.

Analysts at Bernstein point to a different structure at the two companies. SABMiller is more decentralised that AB InBev which is more “frugal” than its target. “For instance, all levels of management in AB InBev travel in coach/economy unless transatlantic and even the CEO stays in modest hotels,” the Bernstein analysts said.

By Jill Treanor

Source: The Guardian

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