Anheuser-Busch InBev (BUD) and SABMiller Agree on Terms of Acquisition
Shares of Anheuser-Busch InBev (BUD) were trading up +2.76 or +2.48 percent to $114.25 per share in this morning’s premarket after news that the company’s board and the board of SABMiller plc had agreed in principle to be sold to AB InBev for £69 billion or approximately $106 billion. AB InBev stock closed at $111.49 per share, down -0.39 or -0.35 percent in Monday’s regular trading session.
Leuven, Belgium based Anheuser-Busch InBev is the result of the 2008 acquisition of U.S. brewer Anheuser Busch by the Belgian/Brazilian brewer InBev, which was the product of the merger of AmBev and InterBrew.
London, UK based SABMiller plc is the second largest brewer in the world and is the product of the 2002 acquisition of U.S. based Miller Brewing with SAB, the holding company for South African Breweries. South African Breweries was founded in 1895 in Johannesburg, South Africa. The company formed a UK based holding company in 1999 and changed its primary stock listing from Johannesburg to London before acquiring Miller in 2002. The company’s most popular brands include Foster’s, Grolsch, Peroni Miller and Pilsner Urquell. SABMiller operates in 80 countries and is also a major bottler of Coca Cola.
The agreement in principal is for AB InBev to pay £44 per share or approximately $66.90 at the current exchange rate. The price is a 50 percent premium to SABMiller’s share price on September 14th, the day before speculation on the merger began.
In addition to the £44 per share offer, AB InBev is offering a partial share option to SABMiller shareholders in which they would receive a combination of cash and stock for approximately 41 percent of SABMiller shares valued at £39.03 per share, a 33 percent premium to September 14th’s closing price. The alternative offer is for SABMiller’s two biggest shareholders, BevCo and Altria Group Inc. to aid with taxation and accounting issues.
AB InBev has agreed to pay a $3 billion reverse breakup fee to SABMiller should the deal fail to pass regulator’s requirements or is rejected by AB InBev shareholders. SAB Miller rejected previous offers from AB InBev claiming the offers undervalued the company; nevertheless, AB InBev sweetened the deal on Monday, offering £43.50 ($66.25) per share.
The combination of the two brewers will create the world’s largest beer maker, with annual sales in excess of $55 billion and nine of the 20 top beer brands. While the deal has been tentatively approved by both boards, the merger could be blocked by regulators or if shareholders reject the deal. So far, improvement in AB InBev’s stock price this morning indicates that the deal will be approved by shareholders.
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