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London - Anheuser-Busch (AB) InBev [JSE:ANB] raised its bid for SABMiller [JSE:SAB] to £79bn (R1.48trn), responding to investor concerns about the deal’s structure after the UK’s vote to exit the European Union prompted a slump in sterling.
SABMiller shareholders will be entitled to receive £45 (R843.99) a share, AB InBev said in a statement on Tuesday, from £44 (R825.20) previously.
AB InBev also increased the amount of cash for shareholders who choose a cash-and-stock alternative. They’ll now receive about £4.66 in cash compared with £3.78 previously.
That offer, valued at about £39 a share when the acquisition was announced last year, had surged to more than £50 late on Monday. With the increased cash, it’s now worth about £51.14 a share.
“The raised offer shows how much AB InBev wants to complete the deal,” Duncan Fox, an analyst at Bloomberg Intelligence, said by phone.
By raising the offer, the world’s biggest brewer addressed concerns from investors including Elliott Management and Davidson Kempner Capital Management that the deal was less attractive in the wake of the pound’s fall.
SABMiller chairperson Jan du Plessis said last week that the board would wait until Chinese regulators approved the takeover before weighing the deal’s terms. SABMiller’s board had unanimously recommended the offer from the maker of Budweiser beer, in what would be the industry’s biggest-ever deal.
The shares closed Monday at £44.40. The new cash-and-shares alternative is 465.88 pence plus 0.483969 restricted shares for every SABMiller share. That value doesn’t include a discount for the fact that the stock issued in the deal can’t be traded for five years, AB InBev said. Its revised offer is final, the Belgian company said.
AB InBev said it intends to finance the payment to SABMiller shareholders from existing cash resources and third party debt. It said it is "satisfied that sufficient resources are available to AB InBev to satisfy in full the cash consideration payable pursuant to the terms of the transaction".
This follows a letter by US activist investor Elliott Management to the SABMiller board, raising concerns about the structure of the deal, according to the Financial Times in London.
"There had been increasing concern among investors over the choice between being paid either in cash or mostly stock after the fall in sterling, which widened a gap in the respective values of the options," the British newspaper said.
"There were concerns that the mostly stock alternative would disproportionately benefit SABMiller’s two biggest shareholders, US tobacco company Altria and BevCo, the investment vehicle of the Santo Domingo brewing family."
AB InBev said on Tuesday that "this offer is final and that it will not further increase the cash consideration".
Bloomberg's Andrea Felsted said on July 20 that there's a possibility that a higher cash offer would bring AB InBev's share price down.
"While digging up extra cash for the deal would be unwelcome, any subsequent drop in the shares could also bring in a bit of extra balance between the two sides of the offer. That suggests there are limits to the extra amount needed to keep institutional investors happy."
