Merger of Budweiser and Miller Faces Final Hurdle…

Written by: Chad Bray – New York Times

If the merger of Anheuser-Busch InBev and SABMiller is approved by shareholders, the combined company’s brands would include Budweiser, Corona, Hoegaarden, Leffe and Stella Artois. Credit Olivier Hoslet/European Pressphoto Agency

LONDON — E. Anheuser & Company started as a small brewer in St. Louis more than 160 years ago – one of several breweries opened by German immigrants that introduced German-style lager to the United States.

Anheuser-Busch InBev, its corporate descendant and the world’s largest brewer, hopes to soon become much bigger – and more dominant globally – as it prepares to gobble up its closet rival, SABMiller, in a deal worth more than $100 billion.

The path to creating a combined company that Anheuser-Busch InBev has called the “first truly global brewer” has taken nearly a year as the company has agreed to a series of asset sales in order to win regulatory approval.

It faces one last hurdle on Wednesday, as SABMiller and Anheuser-Busch InBev shareholders vote on the proposed deal.

The margin to win approval, however, may be tighter than Anheuser-Busch InBev, which is based in Belgium, originally expected.

merger-1To win the support of SABMiller’s two largest shareholders, the deal was structured to give those investors – the American tobacco giant Altria and the Santo Domingo family of Colombia – the ability to take restricted shares, instead of cash. That would allow them to avoid a costly tax bill following the transaction.

Anheuser-Busch InBev agreed to increase its cash offer this summer as the pound declined following Britain’s vote to exit the European Union.

Facing pressure from its investor base, SABMiller, which has recommended that investors approve the transaction, also agreed this summer to treat its two biggest shareholders as a separate class, allowing other investors to vote on the cash offer separately.

Now, a smaller pool of SABMiller shareholders is set to determine the outcome of the deal – with a handful of SABMiller investors expected to vote against the transaction.

Aberdeen Asset Management, an investment management company in Scotland that holds a stake in SABMiller, has publicly opposed the deal, saying it undervalues the company.

Reports in recent weeks also have indicated that Vontobel Asset Management of Switzerland and the British investor Ash Park Capital are both considering voting against the transaction. Vontobel and Ash Park did not respond to requests for comment.

Citigroup said on Monday that it believed that there was a “high likelihood” that SABMiller shareholders would approve the transaction.

merger-2“Considering that ABI has had many conversations with SAB investors in recent weeks, we believe by now they probably should have a reasonably clear view on whether they have enough votes for the scheme to be approved,” Andrea Pistacchi, a Citigroup analyst, said in a research note. “We doubt ABI would go ahead with the vote on Wednesday, unless it were confident of succeeding.

If approved, the transaction is expected to close next month, following the delisting of SABMiller’s shares in London and Johannesburg.

The deal follows the blockbuster combination of Anheuser-Busch and InBev eight years ago – a $52 billion transaction that catapulted the combined company ahead of SABMiller and made it the world’s largest brewer.

The SABMiller transaction would give Anheuser-Busch InBev a substantial operation in Africa, where it has little presence, and greater dominance in Latin America.

“Assuming it goes ahead, A-B InBev’s acquisition of SABMiller will be the third-largest takeover in corporate history; the culmination of over a decade of consolidation within the beer industry,” Anna Ward, alcoholic drinks analyst at Euromonitor International, a market research firm, said. “With an estimated 27 percent share of the beer market and a significant presence in all regions, the combined company will be genuinely global.”

The combined company’s brands would include Budweiser, Corona, Hoegaarden, Leffe and Stella Artois. On a pro forma basis, the company’s annual revenue would be about $55 billion.

To win approval of the deal, Anheuser-Busch InBev has agreed to sell off a variety of assets to satisfy regulators.

merger-3In November, Anheuser-Busch InBev agreed to sell SABMiller’s 59 percent stake in MillerCoors in the United States to SABMiller’s partner in a joint venture, Molson Coors Brewing, for about $12 billion. That deal includes the global rights to the Miller brand and would make Molson Coors the second-largest brewer in the United States, behind Anheuser-Busch InBev.

In April, it accepted an offer by Asahi Group Holdings of Japan to buy the beer brands Grolsch, Meantime and Peroni, as well as associated SABMiller operations in Britain, Italy and the Netherlands, for 2.55 billion euros, or about $2.9 billion.

And Anheuser-Busch InBev also said in April that it would be willing to sell SABMiller’s assets in the Czech Republic, Hungary, Poland, Romania and Slovakia as part of a package of divestments to win approval from European regulators.

Chinese regulators gave conditional approval to the transaction after Anheuser-Busch InBev agreed earlier this year to sell SABMiller’s 49 percent stake in the maker of Snow to China Resources Beer, a state-owned brewer, for about $1.6 billion. China Resources Beer already owns the other 51 percent of the brewer, C. R. Snow.