The merger & acquisition juggernaut rolls on, with SABMiller’s board accepting AB InBev’s juicy cash offer upon condition of a multi-billion-dollar failure fee.
The second-largest brewer in the world (by revenue) is the product of British-based South African Breweries, established in 1895, and American giant Miller Brewing, which SAB acquired in 2002.
The last few weeks have seen extraordinary numbers bandied about in global beer circles, as the number one brewer prowled for a chance to merge number two into its brand behemoth.
After several inadequate offers, the board of SABMiller has agreed to recommend the latest bid to its shareholders, with a daunting US $3bn fee if the deal fails to get over the line with shareholders or regulators.
The current bid stands at £44.00 per SABMiller share, representing a 10.7 per cent premium on the recent high of £39.745 per share, but 50.0 per cent on the recent slump just prior to the news of the takeover attempt – which broke around 14 September; the day upon which prices are being compared.
But AB InBev has also backed itself, offering around 41 per cent of current shareholders the alternative chance to take (approximately) 0.48 per cent of an unlisted AB InBev share plus some cash, representing a less upfront premium of around 33 per cent to the 14 September price. These “partial share alternative” (PSA) options can be exchanged for a full AB InBev share after five years.
Further indicating AB InBev’s commitment to the plan, it has disclosed in a statement an agreement to pay a whopping consolation prize if the deal doesn’t pan out.
Officially still a “Possible Offer” the deal remains subject to approval, and more than likely the forced sell-off of certain brands, but if nothing else, the ancestral tree of mergers & acquisitions that has led to this point suggest it will go ahead.
“In connection with the Possible Offer, AB InBev would agree to a ‘best efforts’ commitment to obtain any regulatory clearances required to proceed to closing of the transaction.
“In addition, AB InBev would agree to a reverse break fee of USD 3 billion payable to SABMiller in the event that the transaction fails to close as a result of the failure to obtain regulatory clearances or the approval of AB InBev shareholders.”
This agreement comes ahead of today’s deadline for an agreement, as stipulated by the UK’s regulators. Both parties applied to have the deadline extended, and now have until 28 October to finalise the arrangement.
The deal would see a global mega-brewer controlling nearly 30 per cent of beer volume, estimated at around 200 billion litres annually. It would be several times larger than the next largest brewer, Heineken.