Anheuser-Busch makes new £68-bn offer for SABMiller

The world's largest brewer, Anheuser-Busch InBev sweetened its bid for SABMiller today, offering just over £68 billion for its largest rival in a bid to expand its reach into Africa and other markets and build the first truly global beer company.

Under the revised proposal, AB InBev has agreed to pay SABMiller £42.15 per share in cash, with a partial share alternative available for approximately 41 per cent of the SABMiller shares.

AB InBev has made two prior written proposals in private to SABMiller, the first at £38.00 per share in cash, which was raised in the second to £40 per share in cash.

SABMiller rejected both of these proposals without any meaningful engagement.

AB InBev expects the revised proposal to be highly attractive to SABMiller shareholders and provide an extremely compelling opportunity for them.

The cash proposal represents a premium of approximately 44 per cent to SABMiller's closing share price of £29.34 on 14 September 2015 (being the last business day prior to renewed speculation of an approach from AB InBev).

AB InBev  said in a statement, ''The revised proposal is designed to enable a compelling cash offer to be made to SABMiller's public shareholders and to provide a continuing attractive investment for Altria Group, Inc and BevCo Ltd (who together hold approximately 41 per cent of the SABMiller shares), which AB InBev believes will satisfy their financial requirements. Importantly, the partial share alternative enables appropriate financing to be achieved and supports the cash offer at a higher price than AB InBev would otherwise be able to offer.''

In response, SABMiller said its board would meet to consider the latest proposal as soon as it could but said it noted the cash offer was only 15 pence a share higher than an informal £42 proposal made "and rejected" at a meeting on Monday.

The all-cash offer within the new proposal announced today (the £42.15 proposal) is only £0.15 higher than the £42 proposal considered and rejected on 5 October 2015, SABMiller said.

The board will, of course, meet formally to consider the £42.15 proposal as soon as practicable and a further announcement will be made thereafter, it added.

''SABMiller is the crown jewel of the global brewing industry, uniquely positioned to continue to generate decades of standalone future volume and value growth for all SABMiller shareholders from highly attractive markets,'' Jan du Plessis, chairman of SABMiller, said.

''AB InBev needs SABMiller but has made opportunistic and highly conditional proposals, elements of which have been deliberately designed to be unattractive to many of our shareholders. AB InBev is very substantially undervaluing SABMiller,'' he added.

The stock element of the partially unlisted shares and cash offer alternative (PUSCA), as communicated to the board of SABMiller, would take the form of a separate class of shares in AB InBev which would be: unlisted; subject to a 5-year lock-up; convertible into ordinary AB InBev shares at the end of that 5-year lock-up period; ranking pro rata for dividends and voting rights with ordinary AB InBev shares; and entitled to unspecified director nomination rights to the Board of the combined company.

The cash offer of £42.15 per SABMiller share is equivalent to a 12 per cent premium to the value of the PUSCA of £37.49 on 6 October 2015.

Assuming a pro rata election for the PUSCA, the £42.15 Proposal values each SABMiller share at £40.21.

The £42.15 Proposal is, inter alia, conditional upon both SABMiller's two largest shareholders, Altria Group Inc. and BevCo Ltd., who together hold approximately 40 per cent of the entire issued share capital of SABMiller, executing irrevocable undertakings to vote in favour of the transaction and to elect for the PUSCA in respect of their entire holdings in SABMiller.

If there are elections for the PUSCA by other SABMiller shareholders for more than the number of shares available under the PUSCA, then the allocations to Altria Group Inc and BevCo Ltd (and any other SABMiller shareholders who elected for more than their pro rata elections) would be scaled back accordingly.

AB InBev has indicated that, with effect from completion of a transaction, it would list the ordinary shares of the combined company (but not the stock element of the PUSCA) on the Johannesburg Stock Exchange by way of a secondary listing.

If a deal is struck and completed, it would create the world's biggest brewing company, combining Budweiser and Stella Artois from AB InBev with Peroni and Miller from SAB.

The enlarged group would generate revenues of $64 billion and earnings of $24 billion, according to AB InBev.

AB InBev is trying to pressure SABMiller into a deal by working with its biggest shareholders, Altria and BevCo, who between them hold 41 per cent of the London-listed group's shares.

The most recent proposal would see the pair, continue as investors in the enlarged group by taking part of their payment in unlisted stock, which could convert to AB InBev shares after five years.

SAB had pointed out, that, as this shares-based element of the deal would pay slightly less than the cash offer, the overall value of the firm would be closer to £65 billion, and would change along with AB InBev's share price.

"This was designed with and for the two shareholders," said Carlos Brito, chief executive of AB InBev. "There's no transaction without them," The Telegraph reported.

Anheuser-Busch InBev SA (AB InBev) could table an initial $106-billion takeover offer for SABMiller, the Sunday Times reported. (See: AB InBev may bid $106 bn for SAB Miller: report).

SABMiller shares rose 1.3 per cent at £36.68 by 0927 GMT, when AB InBev's were 1.4 per cent higher at €99.45.