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July 27, 2016

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AB InBev raises bid for SABMiller

ANHEUSER-BUSCH InBev raised its US$100 billion-plus bid for rival brewer SABMiller yesterday after a slide in the value of the pound following the Brexit vote made the offer less attractive for many investors, threatening to derail the deal.

SABMiller said its chairman talked with his counterpart at AB InBev on Friday about the offer in the light of exchange rate volatility and market movements, although they did not discuss the new terms.

The world’s largest brewer will now offer 45 pounds a share for its nearest rival, up from the 44 pounds announced in October last year.

It also tweaked the terms of an alternative share-and-cash structure designed for SABMiller’s two largest shareholders, raising the cash element by 88 pence a share.

The offer values SABMiller at around 79 billion pounds (US$103.6 billion). In November, when the original bid was officially launched, it was worth around 70 billion pounds, or US$106 billion based on exchange rates at the time. That original bid had since dropped to about US$100 billion.

Aberdeen Asset Management, with a 1.17 percent SABMiller stake according to Thomson Reuters data, said the revised offer was still unacceptable, but analysts suggested the deal was now likely to go through.

SABMiller, which provisionally agreed the deal struck in October, said it had taken on Centerview Partners as a new financial advisor and would consult with Centerview and with shareholders before formally mulling the revised offer.

The takeover is still awaiting regulatory approval in China. SABMiller shareholders would expect to vote on it after that.

AB InBev, which has hedged to cover the pounds initially required, said the revised terms were final. Under British law, this means the price is set. AB InBev could only change it by dropping the offer and waiting six months to make another.

Liberum analyst Alicia Forry said she believed the revised bid was likely to be successful by throwing a “small bone” to activist investors and shutting the door to further increases.

“The main thing from AB InBev’s perspective is they don’t want this to drag and if they engaged (activists) it would,” Forry said.

Bernstein Research brewing analyst Trevor Stirling said SABMiller’s shares would fall to 41.50 pounds if AB InBev’s bid failed.


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