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Cape Town - Anheuser-Busch (AB) InBev and SABMiller [JSE:SAB] investors should watch the SA Competition Commission closely as well as attempts by the government to secure local ownership, jobs, tax and investment, a Nomura analyst said.
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.
READ: AB InBev agrees to buy SABMiller for R1.4trn in record deal
Do not underestimate the ability of the SA government to “fiddle” in the deal, warned Nomura senior emerging markets economist and strategist Peter Montalto on Tuesday.
SABMiller's JSE shares closed at R805 on Tuesday, down from a high of R811 earlier in the day which was an 11% increase from Monday's R732 close.
Montalto said the deal won’t be blocked if it is well structured and AB InBev makes some concession to the Competition Commission, but the commission could delay the deal or make it more complicated.
He cautioned market experts who assume AB InBev can pay cash for JSE-listed SABMiller shares and then have a small portion of non-liquid notionally listed shares on JSE that don’t trade for five years at an economically-disadvantageous rate.
The Public Investment Corporation (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 listed in Brussels at present instead of the unlisted shares currently offered, reported Bloomberg.
The removal of a “real” listing from the JSE will be challenged by government through the Competition Commission, Montalto said. “CC (the Competition Commission) and JSE will try and ensure there is some real dual listing of liquid traded stock onshore,” he said. “The exchange control rules and JSE listing rules can be bought to bear here as well.”
SA will also want to ensure job numbers are preserved, particularly at a manufacturing level. “The CC has in the past sought detailed assurances on levels of investment and local content inclusion in concert with jobs,” said Montalto. “Wider empowerment and BEE issues can also come up here. Union involvement can become apparent here.”
Tax structures will be watched by National Treasury, the SA Reserve Bank and the Competition Commission, utilising the exchange control framework and Competition Commission process to ensure tax efficiency from an AB InBev perspective is minimised, he explained.
Competition regulations, exchange control regulations, dual listing regulations (as SABMiller has been until now) will all be utilised, Montalto explained.
SA cares about local ownership and the perceptions of local empowerment and job creation, he said. “Local fund managers including PIC may be powerless to stop such a process, but government could get involved,” he said.
“The government is not afraid of perceptions of making things difficult for foreign investors – remember it is moving forward with legislation to require minimum 50% local ownership of securities services companies and proposing legislation restricting foreign ownership of land.”
