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All SABMiller shareholders should be treated equally - PIC

London - The Public Investment Corporation (PIC), SABMiller's [JSE:SAB] fourth-largest shareholder, said all shareholders in the brewer should be treated equally in its deal with Anheuser-Busch (AB) InBev.

South Africa's PIC, which owns a 3.42% stake in SABMiller, said all shareholders should be given AB InBev common shares that rank with the company's shares currently listed in Brussels instead of the unlisted shares currently offered.

SABMiller earlier on Tuesday agreed to an improved offer worth about R1.4trn from larger rival AB InBev.

If it goes through, the deal would rank in the top five mergers in corporate history and be the largest takeover of a UK company.

The new group would bring together AB InBev's Budweiser, Stella Artois and Corona brands with SABMiller's Peroni, Grolsch and Pilsner Urquell. For AB InBev it would also add more breweries in Latin America and Asia and crucially opens up new growth markets in Africa.

Africa is expected to see a sharp jump in the legal drinking age population in coming years and a fast-growing middle class more willing to switch to lagers and ales from illegal brews.

Having rejecting four previous proposals, the breakthrough came on Monday evening in the Mayfair offices of boutique firm Robey Warshaw, when AB InBev chairperson Olivier Goudet agreed to push up the price to a level acceptable for SABMiller.

AB InBev said on Tuesday it would now pay £44 in cash per SABMiller share, with a partial share and cash alternative valued at £39.03 a share designed to appeal only to SABMiller's two biggest shareholders, who together own nearly 41% of the company.

The biggest shareholder, cigarette-maker Altria with a 26.6% stake, later said it was pleased with the deal, but South Africa said it would need to assess tax implications and could "in the extreme" try to block it.

SABMiller said its board was prepared in principle to recommend the main cash offer to shareholders and has asked for a two-week extension to the UK-imposed deadline set for 1600 GMT on Wednesday for a formal bid to be made. The new deadline is October 28.

"We have written extensively on the attractions of (an ABI/SAB combination) since 2011 and continue to see major long-term benefits for ABI shareholders now," said Canaccord Genuity analysts.

For many observers this would be the final chapter of decades of consolidation in brewing. The big four, AB InBev, SABMiller, Heineken and Carlsberg, are already present across the globe and brewing more than half of the world's beer.

Break fee

The parties have agreed that AB InBev would pay a break fee of R40.5bn to SABMiller if the deal falls through due to the significant regulatory issues or because AB InBev shareholders do not back it.

The new offer unveiled on Tuesday increases a proposal made on Monday to pay £43.50 in cash, which in turn was an increase from the £42.15 it put forward last week.

The £44 now accepted is 50% above SABMiller's share price on September 14, the day before speculation surfaced about an impending AB InBev approach.

The partial share alternative offer has also been improved, with an increase in the cash element raising the value to £39.03 a share from £37.49 last week, but remains designed to appeal only to Altria and SABMiller's second-biggest shareholder, Colombia's Santo Domingo family, which owns nearly 14% of the UK-based brewer.

Together with the cash offer to other shareholders, the total price AB InBev is offering to pay for SABMiller is worth £68.5bn (about R1.4trn) at current prices.

SABMiller shares were up 9.3% at £39.60 by 1405 GMT on Tuesday, when AB InBev's share price was up 1.8% at €100.10.

Neil Wilkinson, senior equities fund manager at Royal London Asset Management and an AB InBev investor, said he was pleased to see AB InBev finally closing in on a deal it clearly wanted.

"Given its outstanding track record in executing prior transactions, we expect large cost synergies and rapid deleveraging of the balance sheet will allow further transactions a few years down the line, which will enable AB InBev to perpetuate its growth story," he said.

AB InBev has a reputation for fierce cost-cutting, but will need to be at its sharpest to extract savings to justify the price as well as pushing its global brands into new markets.

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