AB InBev sweetens SABMiller offer to address pound's plunge after Brexit

Anheuser-Busch InBev has raised its bid for SABMiller to account for the fall in the value of the pound.
Anheuser-Busch InBev has raised its bid for SABMiller to account for the fall in the value of the pound.PHOTO: AFP

TOKYO (BLOOMBERG) - Anheuser-Busch InBev raised its cash bid for British brewer SABMiller by 2.3 per cent to account for the pound's plunge, while maintaining a deal structure that gives the target's two biggest shareholders a sweeter deal.

SABMiller shareholders will receive 45 pounds (S$80.20) a share in cash, 1 pound more than the prior offer, valuing the company at 79 billion pounds, AB InBev said in a statement Tuesday. 

The bidder also increased the amount of cash in a cash- and-stock alternative that it crafted for the two largest investors, Altria Group and Bevco. Another SABMiller holder, Aberdeen Asset Management, said the revised proposal undervalues the company and remains unacceptable because stockholders aren't being treated equally.

Investors including Aberdeen, Elliott Management and Davidson Kempner Capital Management had raised concern with SABMiller about the deal in the wake of the pound's plunge. SABMiller Chairman Jan du Plessis spoke with AB InBev Chairman Olivier Goudet on July 22 about its offer, SABMiller said in a separate statement.

That conversation came the day after SABMiller's annual meeting, at which du Plessis said he would wait until Chinese regulators approved the takeover before weighing its terms.

"It's clearly designed by ABI to bring matters to a head, and rather than let a groundswell of agitation build up, they're saying 'This is it, like it or lump it'; it's put up or shut up," Trevor Stirling, an analyst at Sanford C. Bernstein, said by phone.

The pound's plunge, after the UK voted last month to leave the European Union, made the deal less attractive in two ways.

First, SABMiller investors based in the US, who hold about 20 per cent of the company's floated shares, will get less of a payoff than they expected in dollar terms if the pound remains near its recent low against the US currency when the deal closes.

Also, the drop in sterling sparked a surge in UK consumer stocks that sell globally, because those companies will get a big earnings boost when converting international sales into their devalued home currency. But SABMiller shares didn't participate in that rally because no matter how high valuations go in the industry, the 44-pound-cash price capped the gains.

"The raised offer shows how much ABI wants to complete the deal," said Duncan Fox, an analyst at Bloomberg Intelligence.