AB InBev ‘surprised’ at SABMiller reaction, after takeover proposal refused

By Rachel Arthur

- Last updated on GMT

SABMiller's reasons for refusal 'lack credibility,' says brewer AB InBev
SABMiller's reasons for refusal 'lack credibility,' says brewer AB InBev

Related tags Ab inbev Stock Stock market Inbev brands Sabmiller

AB InBev says it is ‘surprised’ at SABMiller’s reaction to its mega-brewer proposal: after SABMiller yesterday rejected a $103.6bn / £68bn takeover approach. 

SABMiller believes AB InBev’s latest offer continues to ‘very substantially undervalue’​ the company. Meanwhile there is a division of opinion among SABMiller’s shareholders, while the issue of regulatory hurdles in US and China appear to be adding friction.

Carlos Brito, CEO of AB InBev, this morning said SABMiller’s board “has refused to meaningfully engage.”

He is now calling on SABMiller’s shareholders to voice their support if they want to see discussions between the two brewing giants, adding shareholders should not allow SABMiller’s Board to "let this opportunity slip away."

AB InBev says SABMiller’s explanation ‘lacks credibility’

AB InBev announced yesterday morning that it had made the third offer (following two bids made and rejected in private). But by the afternoon SABMiller’s Board, excluding the directors nominated by Altria Group, had unanimously rejected the proposal.

In turning down the bid, SABMiller said the proposal for £42.15 per share “still very substantially undervalues SABMiller, its unique and unmatched footprint, and standalone prospects.”

This morning AB InBev said SABMiller’s statement ‘lacks credibility’ because its £42.15 per share bid is around 44% up on SABMiller’s share price before renewed speculation about a deal began (£29.34 per share on September 14).

AB InBev also points to a statement made by Altria, which owns around 27% of SABMiller’s shares and has three positions on the board. Altria yesterday said that it supported the £42.15 proposal and had urged SABMiller’s board to engage with AB InBev.

AB InBev says that SABMiller’s board has highlighted the highly conditional nature of the proposals, in particular regulatory challenges in US and China. Responding to the concerns, AB InBev said it has carried out ‘significant work’ on this issue and could provide a clear path.

“AB InBev has repeatedly offered to share this analysis with SABMiller and its advisers. Each time the Board of SABMiller has refused to engage,”​ said a statement from AB InBev.

CEO Brito said: “Notwithstanding our good faith efforts, the Board of SABMiller has refused to meaningfully engage with us.

“Our proposal creates significant value for everybody. How long will it be before shareholders see a value of over £42 in the absence of an offer from AB InBev?

“If shareholders agree that we should be in proper discussions, they should voice their views and should not allow the Board of SABMiller to frustrate this process and let this opportunity slip away.”

Rules from the UK’s takeover panel mean AB InBev has until 5pm on October 14 to announce a firm intention to make an offer; or announce it does not intend to make an offer.

The story so far

Lengthy rumours of a tie-up between AB InBev and SABMiller were confirmed on September 16, with AB InBev announcing it had approached SABMiller, intending to make a proposal to acquire the company.

Yesterday morning, AB InBev said it had made an offer to SABMiller, which would value to company at around $103.6bn / £68bn.

On announcing its offer of £42.15 per share in cash (with a partial share alternative available for around 41% of SABMiller shares), it revealed it had made two prior written proposals in private, which had both been rejected by SABMiller (these had been made at £38 per share in cash and then £40 per share).

By the afternoon, SABMiller had rejected this third offer, saying it undervalued the company.

AB InBev’s portfolio of brands includes Budweiser, Corona, Beck’s, Stella Artois, Leffe, and Hoegaarden and Skol.

Beer and soft drink business SABMiller owns Peroni, Grolsch and Foster’s among others.

If a deal between the two giants goes ahead, it would be the biggest deal in brewing history, with the resulting entity controlling 30% of global beer volumes. Read more about AB InBev’s plans for the tie-up here.

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