The board of SABMiller is warming to the approaches of Anheuser-Busch InBev following a fourth informal bid approach which values the UK-listed brewer at £67.4bn.
The maker of Budweiser and Stella Artois raised its offer to £43.50 a share from £42.15 in cash, with a partial share alternative aimed at SABMiller’s two largest shareholders Altria and the Santo Domingo family. It pointed out the new offer was a 48% premium to the UK-listed brewer’s share price on 14 September, before news broke of talks between the two.
The combination of the world’s first and second brewers would create a giant company making a third of the world’s beer.
The SABMiller board, which has rejected three earlier approaches, did not issue a statement declining the latest offer as it has done on previous occasions nor did it say it was accepting the deal.
“This offer does provide the basis for some form of engagement,” said one person who knows some of the major players well.
Shares of SAB, maker of beers including Peroni and Grolsch, were down marginally at £36.67, as some investors worried the parties remained too far apart to agree to a deal. “The last reaction from SAB was that the previous offer was significantly undervaluing it,” said Morningstar analyst Phil Gorham. “The latest offer is not a significant improvement.”
At least one institutional shareholder contacted by the Guardian felt the 3% increase on the previous offer was not sufficient for it to agree to a deal.
Some said SABMiller should hold out for a bid nearer to £45 a share, but accepted the current offer might further split shareholders, raising fears among some that the bidder could walk away.
Altria, the owner of Phillip Morris cigarettes, which controls 27% of SABMiller, has already agreed to accept the lower offer. But Bevco, the vehicle controlled by the wealthy Santo Domingo family of Colombia, which has 14%, has so far rejected AB InBev’s approaches on valuation grounds.
The cash-and-share alternative, which is designed to appeal to Altria and the Santo Domingo families in particular, to assist them in avoiding large tax bills, has been sweetened in the latest proposal. However, it values SABMiller shares at only £38.88, short of the main cash offer and there may be room for it to be improved further. Significantly the cash element of that alternative offer has been raised by 119p to 356p.
The further increase in the offer from the Brazilian-Belgian brewer, albeit a relatively small one, will intensify pressure on SABMiller’s chairman, Jan du Plessis, to open talks on a deal to buy the group, which was founded 120 years ago as South African Breweries. The view of the Santo Domingo family will be crucial because the bidder has made it clear it favours a friendly merger. Du Plessis last year fought off a merger approach from Glencore as chairman of miner Rio Tinto.
The new offer came before Wednesday’s bid deadline and after SABMiller’s fourth-biggest shareholder earlier in the day rejected AB InBev’s previous price as too low.
“We have confidence in the board and we will rely on their judgment. They have said the price is too low and we agree with them,” said Dan Matjila, chief executive of Public Investment Corporation..
The South African investment manager, which owns about 3% of SABMiller, said last week it would seek guidance from brewery group’s board about the financial aspects of the proposed deal.
It is the latest major SABMiller investor to say AB InBev’s approach is too low to buy the company, whose brands also include Castle beer in Africa. SABMiller’s board has said the proposal “very substantially undervalues” the business.
SABMiller shares rose 0.8% on news of the latest offer.
Aberdeen Asset Management said last week it could see the potential benefits of a merger but that AB InBev’s proposed offer was opportunistic and too low. SABMiller’s fifth-largest shareholder, Kulczyk Investments, rejected AB InBev’s valuation. Investec, another significant investor, was also reported to be against the deal.
AB InBev’s chief executive, Carlos Brito, has urged SABMiller shareholders to tell their board to enter serious talks before Wednesday’s 5pm deadline for AB InBev to lodge a formal offer.
