Anheuser-Busch InBev NV made a formal $107 billion offer to buy SABMiller Plc, sealing a long-anticipated deal that combines the world’s biggest brewers into a company controlling about half the industry’s profit.
To help gain antitrust approval, Molson Coors Brewing Co. will acquire SABMiller’s 58 percent stake in MillerCoors LLC for $12 billion, giving it full control of a business that makes Coors Light and Blue Moon. The Budweiser maker will pay 44 pounds a share in cash for a majority of the stock, the companies said, confirming a price accord announced on Oct. 13. The deal will lead to annual pretax cost synergies of at least $1.4 billion, they said.
The takeover of SABMiller will give AB InBev beer brands such as Peroni and Grolsch, provided it gets past regulators. The companies reached a tentative agreement last month after weeks of haggling over the price, and spent the past month hammering out a formal deal. The Belgian suitor must pay a fee of $3 billion if it fails to get the necessary approvals.
“We believe this combination will generate significant growth opportunities and create enhanced value to the benefit of all stakeholders,” AB InBev Chief Executive Officer Carlos Brito said in the statement.
SABMiller shares rose 1.5 percent to 4,034 pence at 8:37 a.m. in London. The price of the cash offer is 50 percent above the closing value on Sept. 14, the day before takeover speculation resurfaced. AB InBev gained 0.3 percent to 111.5 euros in Brussels.
AB InBev will finance the cash part of the transaction from existing resources and third-party debt. It lined up seven banks to arrange as much as $70 billion in financing, people familiar with the matter have said.
MillerCoors Stake
The planned sale of the stake in MillerCoors is designed to “promptly and proactively address regulatory considerations,” the companies said. MillerCoors represented the biggest antitrust hurdle to the merger, analysts have said, though SABMiller’s stake in China’s CR Snow may also need to be sold.
The merged company will be listed in Brussels, Mexico and Johannesburg.
The $1.4 billion of projected annual savings equates to less than 7 percent of SABMiller’s sales, excluding MillerCoors. AB InBev achieved cost savings representing about 16 percent of sales when it bought Anheuser-Busch Cos. in 2008 and Mexico’s Modelo in 2013. To achieve those benefits, the brewers said they may have to “implement certain restructurings or reorganizations,” without being more specific.
Dealmaking Spree
Together, AB InBev and SABMiller will be the world’s largest consumer-staples company by earnings, according to Exane BNP Paribas analysts, who estimate the combined company will make $25 billion before interest, tax, depreciation and amortization in 2016. The enlarged brewer will have the number one or two positions in 24 of the world’s 30 biggest beer markets, they estimate.
After years of speculation, AB InBev’s pursuit of its nearest rival was hastened by the drag of slowing economies in the emerging markets of China and Brazil. For AB InBev CEO Brito, the combination would cap a $90 billion dealmaking spree over the last decade, turning a regional brewer into the undisputed global leader.
The SABMiller proposal is an acquisition partly borne out of necessity, with AB InBev’s growth set to slow over the next five years, estimates compiled by Bloomberg show. A 20 percent drop in SABMiller shares in the months preceding the approach and the prospect of an end to cheap credit also served as a catalyst to a takeover.
Share Alternative
SABMiller’s two largest shareholders, Altria Group Inc. and Bevco Ltd., can receive cash and stock for their stakes, which account for just over 40 percent of the company. The terms of the partial share alternative are unchanged from when they were first disclosed last month and are equivalent to a value of 4,185 pence per SABMiller share.
AB InBev turned to Lazard for financial advice and its corporate broker Deutsche Bank AG, as well as lawyers from Freshfields Bruckhaus Deringer and Cravath Swaine & Moore. Robey Warshaw, JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs & Co. are advising SABMiller, which sought legal advice from Linklaters and Hogan Lovells International.
source: Bloomberg
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