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Cape Town - The impact of any takeover of SABMiller by AB InBev on the South African economy will be an important consideration, National Treasury said on Thursday.
It said Minister of Finance Nhlanhla Nene will apply his mind to any application by AB InBev to acquire the shares of SABMiller.
Nene will ensure compliance with existing conditions and consider the impact on the SA economy.
Each regulatory authority in SA will also consider any AB InBev application on its merit, in terms of the regulatory framework.
South Africa’s legislation requires that any significant cross-border transaction be approved by the minister of finance.
No such application has been submitted yet to the South African Reserve Bank by SABMiller as yet.
Certain conditions were imposed on SAB when it applied in the late 1990s to re-domicile to the UK.
These relate to the SA public interest, the operations and assets of the South African holding company and any sales proceeds.
READ: AB InBev agrees to buy SABMiller for R1.4trn in record deal
Ratings agency Moody's Investors Service has placed SABMiller's rating under review with direction uncertain on Thursday.
This is for the group's A3 long-term senior unsecured rating, the provisional (P)A3 rating of its medium-term note programme (MTN) and the A3 senior unsecured ratings of its guaranteed subsidiaries.
AB InBev announced on Tuesday that it has agreed to buy SABMiller [JSE:SAB] for £68bn (about R1.4trn), in its fourth takeover attempt this month. SABMiller spurned three previous proposals.
Moody's said the review reflects its observation that if SABMiller were to accept a proposal by Anheuser-Busch (AB) InBev, the financial leverage of the combined group is likely to increase to levels not consistent with SABMiller's current A3 rating. This could result in negative pressure on SABMiller's rating.
Any actual rating change could be less material depending on the deal's final terms, which might still change, and the structure of the transaction, according to Moody's.
At the same time, the agency emphasised that 'direction uncertain' recognises that it at the moment it cannot exclude that the review process might conclude with the rating of SABMiller being upgraded by one notch.
This would be in line with Inbev's current rating level. Moody's, however, sees this as a less likely scenario.
"A merger could face a number of hurdles, including the need to obtain regulatory approval which could require the disposal of some assets. This will have an impact on the final financial leverage of the combined group," Moody's explained.
Moody's also announced on Thursday that it is placing the ratings of AB InBev and certain related subsidiaries under review for downgrade. This includes its A2 long-term senior unsecured ratings and its short-term Prime-1 rating.
"The review will consider the significant increase in leverage and likely time period to reduce leverage as a result of the partially debt funded acquisition," said Moody's.
"It will also consider the execution risks associated with meeting regulatory requirements including asset sales, the implication for various partnerships that the companies' have globally, integration risks, possible synergies, and the likely financial policy going forward."
The review will also consider the strategic benefits of the acquisition, including greater scale and business and geographic diversification.
Moody's expects that any downgrade would be no more than three notches. It emphasised that any actual rating change could be less material depending on the final terms and structure of the transaction.
Nomura senior emerging markets economist Peter Attard Montalto cautioned earlier this week that AB InBev and SABMiller investors should watch the SA Competition Commission closely as well as attempts by the government to secure local ownership, jobs, tax and investment.
In Montalto's view the deal won’t be blocked if it is well structured and AB InBev makes some concession to the Competition Commission. The commission could, however, delay the deal or make it more complicated.
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