Shareholders split as deadline approaches for AB InBev SABMiller merger

12 October, 2015

A rift between the major shareholders at SABMiller is widening as the deadline for AB InBev’s £70bn takeover approaches.

Under UK Takeover Panel rules, if the bid isn’t formalised by 5pm Wednesday 14 October, then it must be withdrawn for at least six months.

It is possible for the panel to agree an extension, but only with the approval of SABMiller’s board.

SAB’s two largest shareholders are US tobacco company Altria, which owns 27%, and the Columbia-based Santa Domingo family, which controls 14% through an investment vehicle.

Altria is supporting AB InBev’s offer. The Santa Domingo family is not.

The company’s other major investors, which include Aberdeen Asset Management and South Africa’s Public Investment Corporation, have sided with the Santa Domingo dynasty and rejected the current offer.

So far, SABMiller’s board has rejected offers of £38, £40 and £42.15 a share. If latter had been accepted, it would have valued the brewer at £69.6bn. The board, however, regards that as "very substantially undervaluing" the company.

In response to the takeover bid, SAB Miller has announced plans to cut costs by some £900m over the next four years.

The aim is to re-assure existing shareholders that it can deliver on economies without the assistance of AB InBev. But the move is also likely to drive the company’s share price higher, thus making the potential takeover more expensive.

The FT has highlighted the economies of scale that the merger would enable. Over the last fifteen years, it reports, AB InBev has gone from a 10% operating margin to a 32% operating margin as it has expanded and acquired other businesses.

Were the takeover to go ahead it would create a company valued at some £180bn.

The combined company would produce a third of the world’s beer and would have a 78% share of the US market.

As a result, the merger, if it is agreed, would come under close scrutiny from competition regulators in the US and elsewhere.

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