Coverage: Anheuser-Busch InBev slams SABMiller

After SABMiller’s board of directors rejected its $104 billion bid, Anheuser-Busch InBev criticized the company for refusing to “meaningfully engage” in the takeover talks.

Chad Bray of The New York Times had the company’s reaction:

Anheuser-Busch InBev stepped up public pressure on Thursday, a day after SABMiller’s board of directors rejected a $104 billion bid from its brewing rival.

Anheuser-Busch InBev said on Thursday that it was “surprised” that SABMiller determined the latest takeover offer — its third in recent weeks — “still very substantially undervalues” the company.

Anheuser-Busch InBev, the brewing giant behind Budweiser and Stella Artois, is pressing ahead in hopes of securing the largest beer merger in history before a looming deadline. Under British takeover rules, it has until Wednesday to make what is considered a formal offer for SABMiller or to walk away for up to six months. The proposals so far have not been formal offers, under British law.

The latest rejection came despite support for the deal from the American tobacco giant Altria Group, which owns about 27 percent of SABMiller. The offer includes an option for Altria and other investors to accept a portion of the offer in restricted shares instead of cash.

“Notwithstanding our good faith efforts, the board of SABMiller has refused to meaningfully engage with us,” Carlos Brito, Anheuser-Busch InBev’s chief executive, said in a news release. “Our proposal creates significant value for everybody.”

“How long will it be before shareholders see a value of over GBP 42 in the absence of an offer from AB InBev?” he added. “If shareholders agree that we should be in proper discussions, they should voice their views and should not allow the board of SABMiller to frustrate this process and let this opportunity slip away.”

Thomas Mulier of Bloomberg expanded on AB InBev’s criticism of SABMiller’s behavior:

AB InBev also disputed SABMiller’s contention that antitrust authorities might block the deal. The target said Wednesday when AB InBev first publicly announced the details of a potential bid that the buyer “has not yet provided comfort” to SABMiller that it can get the deal past regulatory hurdles in the U.S. and China.

“Together with its advisers, AB InBev has done significant work on regulatory matters and has identified solutions that provide a clear path to closing,” the Belgian brewer said. “AB InBev has repeatedly offered to share this analysis with SABMiller and its advisers. Each time the board of SABMiller has refused to engage.”

Saabira Chaudhuri of The Wall Street Journal explained the deal that SABMiller rejected:

Anheuser-Busch InBev publicly slammed SABMiller PLC Thursday for rejecting its latest proposal to buy the world’s second-largest brewer in a complicated cash-and-stock deal that the Belgian-based brewer insists is a good one for shareholders.

AB InBev on Wednesday made public its proposal to buy SABMiller for £42.15 ($64.57) in cash and offered what it called a partial share alternative for 41% of shares, which translates into a combination of stock and cash that has a combined lower value of £37.49. If SABMiller were to agrees to the proposal, AB InBev will end up paying £65.14 billion for SABMiller. The proposal has the support of SABMiller’s largest shareholder, Altria Group Inc.

SABMiller in response said the offer “still very substantially undervalues SABMiller, its unique and unmatched footprint, and its stand-alone prospects.” Its board—excluding the directors nominated by Altria—rejected the proposal, which AB InBev said was the third it had made in recent days.

Josh Noble and James Fontanella-Khan of The Financial Times explained how AB InBev could just walk away from the deal entirely:

People close to the senior management of AB InBev have warned that the company would have no qualms about walking away if SAB failed to engage with them at a reasonable price.

“These guys are very disciplined,” said one person familiar with the thinking of the company’s top executives. “In the past they have walked away from deals where they thought the other side was trying to extract more than they were willing to pay . . . they won’t be bullied into paying more than they think is right.”

Another person who worked with the company in the past but is not directly involved in the current negotiations added that if AB InBev failed to acquire SABMiller there would be other interesting options for the Belgian-domiciled beer maker.

“A combination with SABMiller is clearly their top priority but there are several other deals that ABI could do. They aren’t desperate,” the person said.

Analysts have been divided over the viability and appeal of AB InBev’s proposed tie-up, with some saying the bid is still too low and others concerned about the competition issues likely to arise from combining the world’s top two brewers.

James Edwardes Jones, RBC Capital Markets analyst, believes that a deal will ultimately be struck at around £44 per share.

“The reality, we think, is that the two sides are much closer to an agreement than it might appear,” RBC wrote in a note.

If completed at £42.15 per share, the deal would already be the third largest takeover in history, according to Dealogic data.