SABMiller (SAB.L) has not ruled out asking Anheuser-Busch InBev (ABI.BR) to revamp its proposed $100 billion-plus takeover offer before formally recommending the bid, a source close to the London-listed brewer told Reuters, amid rising shareholder disquiet about the terms.
SABMiller’s board is meeting on Wednesday, a day before its annual shareholder meeting, to discuss how to quell unease about the disparity between ABI’s 44-pounds per share cash offer and a stock-and-cash alternative designed for SAB’s biggest investors, cigarette maker Altria (MO.N) and Colombia’s Santo Domingo family, the source said.
When the original deal was announced in November, that partial share alternative — which avoids triggering large tax bills — was worth about 39 pounds.
But the recent fall in the pound and rise in ABI’s shares have increased its value to about 51 pounds, representing a premium of around 15 percent to the cash offer.
All investors have the option to take the stock and cash offer but under current terms the stock cannot be traded for five years, rendering the option highly unattractive for most fund managers.
“At this stage the board will reassure investors and tell them their concerns will only be addressed after the deal gets regulatory clearance,” the first source close to SAB said.
“After the pre-conditions are satisfied, (the board) will need to decide whether to refresh its recommendation for the ABI bid or ask for improved terms,” the source added.
SABMiller declined to comment.
A second source close to SABMiller described the long-planned meeting as “routine” prior to an AGM and said it was unconnected to recent stakebuilding by activist investors The Children’s Investment Fund Management (TCI) and Elliott Advisors.
Those investments have raised the prospects of a late opportunistic push for more cash from ABI, which counts Budweiser and Stella Artois among its top brands.
ABI’s proposed takeover has already been approved by European and South African regulators but U.S. and Chinese antitrust authorities have yet to sanction the union.
Until then, the deal terms remain flexible and subject to revision, the first source said.
“Regulatory approval is expected very soon. It could come any time now and this is why agitators are building stakes,” the source said.
Minority investors meanwhile are waiting nervously to see if any last-minute jostling could secure them more cash or derail the merger altogether.
“They (Elliott) have previous form here in trying to extract value close to decision day … but the deal feels done so it may be too little too late,” said one SABMiller investor, who said he would back a campaign for fresh terms as it was in his clients’ interests.
“The fall in sterling makes the cash offer less attractive to general shareholders. The ‘insiders’ got a better deal here than the other shareholders,” he said.
Besides increasing the cash offer to minority investors, sources have suggested that ABI could also address the disparity by increasing the cash component offered to Altria and the Santo Domingos or reducing the lock-up period on the shares.
Currently structured as a ‘scheme of arrangement’, the deal needs approval by 75 percent of shareholders but sources also said ABI could switch to a straight takeover offer, which only needs a majority.
(Reporting By Pamela Barbaglia, Sinead Cruise and Martinne Geller, writing by Sinead Cruise; Editing by Elaine Hardcastle)