Business World

Saturday 21 April 2018

It's Miller time for Anheuser-Busch as $106bn takeover accepted

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Philip Blenkinsop and Martinne Geller

SABMiller has accepted a takeover proposal at the fifth time of asking after Anheuser-Busch InBev, the world's largest brewer, set out a cash-and-share package currently worth $106bn (€93bn).

The deal to create a brewer making almost a third of the world's beer would rank in the top five mergers in corporate history and be the largest takeover of a UK company.

The new group would combine AB InBev's Budweiser, Stella Artois and Corona lagers with SABMiller's Peroni, Grolsch and Pilsner Urquell.

AB InBev would add certain Latin American and Asian breweries to its already large presence and, crucially, see it enter Africa for the first time.

AB InBev ceo Carlos Brito said a study of SABMiller's African beer markets and talks with top shareholders led to an "alignment of stars" that drew it to its nearest rival.

But observers say the real catalysts for the $100bn takeover proposal made public on October 7 are a steep fall in SABMiller's share price, search for growth beyond Anheuser-Busch's declining core Americas markets and a desire not to give SABMiller's new management enough time to execute a workable defence.

Analysts have speculated on the tie-up of the world's top two brewers for years. Mr Brito told a recent conference call that his company has been eyeing its rival for "quite a while".

In the last few months though Anheuser-Busch has done "deep dive" studies of the top nine African markets, which would include SABMiller markets such as South Africa and Nigeria.

Anheuser-Busch's larger shareholders, principally Belgian and Brazilian families, have also approached SABMiller's two main investors, cigarette-maker Altria and the BevCo company of Colombia's Santo Domingo family, which together own 40.5pc of the UK-based brewer.

"Those two things were not the case a year ago, knowledge about Africa and knowledge about the intentions of those two shareholders, in terms of them being at least receptive to an approach," Mr Brito said, while acknowledging that BevCo had not given its support to his proposal.

SABMiller had called the approach "opportunistic", timed to take advantage of a double-digit decline in its share price in July and August, depressed by weaker emerging market currencies.

"They saw an opportunity and they jumped on it," said Morningstar analyst Phil Gorham.

Looking back, Anheuser-Busch's shares have outperformed those of its target since 2010, meaning its market cap has swollen to beyond twice that of SABMiller from 1.6 times five years ago, making a purchase easier to fund.

While the share price may explain the exact timing, analysts say Anheuser-Busch's own performance woes and changes at SABMiller also played a role.

In just over a year, SABMiller has replaced its chairman, chief financial officer and the head of its US joint venture MillerCoors.

Ceo Alan Clark has only been in place since April 2013, succeeding long-standing leader Graham Mackay who has since died.

"It's well-known that the management is not as stable as it used to be," said Berenberg analyst Javier Gonzalez Lastra.

HSBC said investors should also not ignore the fundamental weakness of Anheuser-Busch's core markets of Brazil and the United States, saying the company has been driven to pursue a merger "out of need", rather than from a position of strength as it had in the past. (Reuters)

Irish Independent

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