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Cape Town – The Food and Allied Workers' Union (Fawu) said it is willing to go all the way to the Constitutional Court in its clash with Anheuser-Busch (AB) InBev over a share proposal stemming from its buyout of SABMiller [JSE:SAB].
Fawu is fuming over a proposal made by AB InBev [JSE:ANB] regarding a broad-based black economic empowerment (B-BBEE) scheme established in 2010 as a 10-year scheme to provide long-term economic benefits to a broad range of previously disadvantaged South Africans.
AB InBev said it proposed voluntary enhancements to SAB’s Zenzele Employee Share Ownership Programme (ESOP) scheme to ensure that its participants benefit from the combination, both now and in the future.
However, Fawu general secretary Katishi Masemola told Fin24 on Tuesday that the union's lawyers were having a pre-hearing meeting on Tuesday morning with the Competition Tribunal as it “seeks a remedy to get a quick end to the scheme”.
“If the scheme does not come to an end, one class of shareholders will be discriminated (against),” he said. “Black shareholders are not being treated the same as the other shareholders.”
“Why can’t they pay the beneficiaries? They must pay the beneficiaries on the same terms and conditions as is stipulated in the terms and conditions of the scheme,” he said.
Merged company guaranteed to grow - Fawu
“We all know this outfit will grow,” he said. “The next four or five years up to 2020, there will be guaranteed growth. There is no need to guarantee a minimum and say it is a generous offer. It’s not. The size, scale and profitability of the business is a guarantee. We all know this company will be doing well in 2020.
“We will seek to argue this issue in a full-blown hearing and for the tribunal to make a ruling out on that,” he said. “If the tribunal does not take our case seriously, we will appeal it at the Competition Commission and then if that doesn’t work, we will take it to the Constitutional Court.
“Discrimination is a constitutional issue and so we might have to take it there,” he said. “That’s where we are going. We apparently have a 50/50 possibility of winning and so we are taking our chance. We will fight all the way.”
Competition Commission spokesperson Chantelle Benjamin told Fin24 on Tuesday that the panel is still being constituted. "Some parties have indicated they may intervene in this matter, but it will only be clear which parties are intervening by June 15, when they make their submissions," she said.
The Tribunal hearing date has been set for June 22 to 24, Reuters reported on Tuesday.
The Competition Commission approved AB InBev’s R1.5trn takeover of SABMiller last week on condition that it sell a stake in wine, cider and spirits producer Distell Group.
However, Fawu said it is concerned with this recommendation “given the flawed understanding of the so-called special dividend payment undertaking by the merging parties or by AB InBev”.
What AB InBev is proposing
The AB InBev proposal would protect and enhance participants’ existing investment by guaranteeing a minimum value for SAB Zenzele shares - based on the £44 per share cash offer being paid to SABMiller shareholders - when the scheme matures in 2020, AB InBev said in a statement on Tuesday.
“AB InBev is proposing an upfront advance cash payment for Zenzele participants to be paid shortly after closing the combination,” the company said. “The cash payment would be roughly equivalent to the total gross dividends paid to participants from 2010 up to November 2015, and forms part of the guaranteed amount.
“Under the AB InBev proposal, participants would therefore enjoy the same premium being paid to SABMiller shareholders, would see an immediate cash benefit from the combination, and would benefit from future growth in the business, with no downside risk due to the guaranteed minimum value.
“Within two years of closing the proposed combination, AB InBev would also present an outline of its black economic empowerment plans to stakeholders in preparation for the maturity of the Zenzele scheme.”
What Fawu will argue at the Competition Tribunal
However, Fawu said in a statement on Monday that the first prize would be an acceleration of the ESOP Scheme “to a quick end and for a pay-out”.
“The second prize is for an ex-gratia once-off payment of an average of R165 000.00 per beneficiary, totalling about R1.5bn, to be paid out from the coffers of merging companies in lieu of opportunity cost of staying locked till 2020 in the scheme.
“If anything, the status quo is better than this advanced payment or an interest-bearing loan from shareholding assets of beneficiaries and the latter meant to be reduced in NAV (net asset value) because of this loan come 2020.”
Fawu will be going to the Competition Tribunal to argue:
“One, to expose the so-called special dividend pay-out, as undertaken by AB InBev, as nothing but an unsolicited loan that potentially violates other laws in the country. In fact, this advanced payment to beneficiaries, based on their shares as collateral, is not a ‘lucrative’ offer as it is made out to be and we will show how ridiculously costly this will be in terms of interests charged and overall erosion of the net asset value of the shareholding to each individual beneficiary.
“Two, to explain that in terms of the … (ESOP) scheme, there is an acceleration clause that allows for the scheme to be brought to a quick end based on the change of control and ownership.
“Three, that the discriminated and differentiated treatment of SABMiller shareholders, with those from BEE or ESOP to be specific, is meant to remain locked in while other shareholders will be ‘smiling’ all the way to the bank to cash in from the AB InBev windfall payment.”
AB InBev set to make historic announcement
Fawu said the above should be juxtaposed by the fact that the 1 700 senior managers and executives of SABMiller stand to make $2.1bn in share options and bonuses, including about $20m or R300m for SABMiller CEO Alan Clark.
AB InBev CEO Carlos Brito said the company is committed to making a positive contribution to South Africa and has made wide-ranging commitments on employment, investing in the supply chain and promoting B-BBEE.
“Our proposal to enhance the Zenzele scheme delivers a balance between guaranteeing participants the same premium being paid to SABMiller shareholders, and ensuring they benefit from future growth of the combined company,” he said.
AB InBev said it has guaranteed there will be no involuntary job losses in South Africa as a result of the transaction and has committed to maintain its total permanent employment level in South Africa, as at the date of closing, for a period of five years.
On Wednesday, AB InBev and the City of Johannesburg will make a historic announcement designed to accelerate the socio-economic transformation drive of the lives of the people of Johannesburg.
