Johannesburg - Anheuser-Busch InBev (AB InBev) has upped the ante in its bid to buy out SABMiller to create the a global brewing colossus.
The Belgium brewer has now increased its offer to £42.15 a share, which values SA’s brewing giant at $103.63 - or R1.4 trillion. SABMiller’s market capitalisation is currently R1.2 trillion as its share price has ramped up since the rumours started around a possible takeover.
In discussing the latest offer via a conference call on Wednesday morning, AB InBev CEO Carlos Brito noted the offer was a good one and SABMiller should recommend the bid to its share holders. However, the Belgium brewer cautioned that it was not yet a firm offer, as it still has until October 14 to put a firm offer on the table.
Brito said the 44 percent premium on SABMiller’s pre-rumour share price was attractive to shareholders, and noted it would take the stock three to four years to reach that level on its own.
In addition, AB InBev indicated it would remain committed to SA, and keep SABMiller’s Johannesburg head quarters. “We will sustain SABMiller’s heritage.”
SABMiller, which was previously known as South African Breweries, dates its history back to 1895 - making it a historical icon that is as old as SA’s first industry. On its website, it notes its origins lie in the Johannesburg gold rush of 1886.
“Digging for gold under Africa’s sun was thirsty work, and enterprising brewers seized the opportunity to refresh the booming population. Foremost among these was Charles Glass, founder of the Castle Brewery. Glass was a perfectionist who would sell only the highest-quality beer, and his thriving business soon caught the attention of investors.”
Two years after founding, it went on to become a listed company, and is currently the second-oldest listed company still around after DRDGold, which made its debut in 1895.
Keeping the legacy
Brito says AB InBev would maintain this history by seeking a secondary listing on the JSE, and would also support black economic empowerment.
"We have the highest respect for SABMiller, its employees and its leadership, and believe that a combination of our two great companies would build the first truly global beer company," said Brito. "Both companies have deep roots in some of the most historic beer cultures around the world and share a strong passion for brewing as well as a deep seated tradition of quality.
“By bringing together our rich heritage, brands and people we would provide more opportunities for consumers to taste and enjoy the world's best beers. We also both strive to have a positive impact on the communities in which we work and live as two of the world's leading corporate citizens. Put simply, we believe we can achieve more together than each of us could separately, bringing more beers to more people and enhancing value for all of our stakeholders."
As a result, AB InBev would expect that key members of SABMiller's management team and employees would play a significant role in the combined company across the organisation.
Global opportunities
AB InBev says its bid would create a global brewer with opportunities for growth in Africa, Asia as well as Central and South America. Brito says the company is “very excited” to invest in Africa, as offers “great growth prospects” that would give it critical growth mass.
As a combined company, the group would generate revenues of $64 billion and operating profit of $24 billion. SABMiller currently makes more than 200 beers in over 80 countries and turns over more than $22 million. AB InBev, by comparison, turns over more than $47 billion a year through its more than 200 brands that collectively own 25 percent of the global market.
SABMiller, which has reportedly been fending off the advances, on Tuesday reported second quarter sales earlier than expected, and said group revenue, excluding currency effects, rose 6 percent, driven by demand in its Latin American and African markets.
Brito says AB InBev is “dissapointed” both its previous overtures to the SABMiller board had been rejected. Its initial offer was at £38 and its second at £40. He would not be drawn on whether a better bid would be tabled should this one fall through.
AB InBev’s latest offer has a complicated structure as the company has made the offer in cash, with a partial share alternative available for Altria and BevCo, which combined hold 41 percent of the brewer. Brito says the offer was structured this way so the two biggest shareholders could remain invested, although they would be locked in for five years.
“AB InBev expects that most SABMiller shareholders will likely accept the higher premium cash offer and, should they wish to, re-invest their proceeds in AB InBev's listed ordinary shares. However, any SABMiller shareholder will be able to elect for the partial share alternative,” notes the statement.
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