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SAB Miller, ABInBev merger advanced

SHARE   |   Wednesday, 04 November 2015   |   By Kabelo Adamson

On the verge of making a historic takeover of SAB Miller, Anheusar-Bush Inbev (ABInBev) on Friday posted strong financial results as the deadline to make its offer approached.

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ABInBev was given until October 28 to make its intentions known if it is making an offer or announce that it does not intends to make an offer, however the two on Wednesday on the day of the deadline agreed to extend buyout offer by a week to allow further discussions to take place.

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Bloomberg quoted ABInBev official as having said, “We are particularly pleased with the performance of our Global Brands which delivered double digit volume and revenue growth.”

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ABInBev, producers of premium beers such as Budweiser and Corona - according to Bloomberg - has seen its operating profit increase by 9.6 percent in the third quarter $4.4 billion with 2015 sales expected to grow above inflation.

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Last month KBL through its communications manager said the decision is still being discussed at the top level and information will be shared once the decision has been taken. However, reports have emerged that the two biggest brewers are to merge in a deal worth US$100 billion that will go down as one of the top five mergers in corporate history and will be the largest takeover of a UK-based company, Reuters reported recently.

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SAB Miller is the controlling shareholders in the local brewer, Kgalagadi Breweries Limited with 40 percent stake while the remaining 60 percent is in the hands of Sechaba Brewery Holdings Limited (SBHL).

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Recently the two companies announced that they have reached agreement in principle on the key terms of a possible recommended offer to be made by ABInBev for the entire issued share and to be issued share capital of SAB Miller.

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“The board of SAB Miller has indicated to ABInBev that it would be prepared to unanimously recommend the all-cash offer of GDP 44.00 per SAB Miller share to SAB Miller shareholders, subject to their fiduciary duties and satisfactory resolution of other terms and conditions of the offer,” the two announced in a statement.

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Following SAB Miller’s rejection of four offers which were said to be undermining the company’s value, ABInBev will pay about US$ 68 in cash per SAB Miller share.

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Though the deal is still in the stages of the “possible offer” with ABInBev given until October 28, 2015 to either announce a firm intention to make an offer or announce that it does not intend to make an offer, the merger is on the cards which will make ABInBev to spread its footprints the Middle East and Africa as well as Eastern Europe, markets currently controlled by SAB Miller. The deadline was on Wednesday moved further by a week to allow the two brewing companies to engage in further discussions.

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What the merger means to KBL

SAB Miller is currently the controlling shareholders of KBL with a 40 percent stake, having arrived in 1977 while the remaining 60 percent is in the hands of an investment company, SBHL. SAB Miller through its African subsidiary further holds 17 percent stake in Sechaba.

Sechaba Board of directors has a number of SAB Miller employees, including the Managing Director, Johan de Kok who has been with SAB Miller family for a long period. Others on the board under the employ of SAB Miller include Finance Director, Gert Nel, and Non-Executive members, Wayne McCauley who is employed by SAB Miller plc as Sales and Distribution Director at SAB (pty) Ltd and Nadira Sheik, SAB Miller Africa Senior Manager-Finance and Control.

While it is inevitable that there is likely to be changes in terms of board members, particularly non-executive members, it remains to be seen what changes will be effected with regards to senior executive management if the take-over materialises. The looming merger is likely to bring fears of job losses with the company reportedly having a reputation of cutting jobs and concerns that the mega company will push up prices and muscle out craft-beer breweries whereas on the other hand Moody’s says the merger would raise leverage and risk but bring strategic benefits.

The other issue likely to be a concern is the alcohol levy which the government has committed to increase up to 70 percent from the current 50 percent. The issue has been sore to SAB Miller and it has once considered relocating KBL operations to South Africa.

SBHL share price has been in consistent despite challenges facing the company such as unfriendly trading environment the group is one of the most liquid entities at the Botswana Stock Exchange. According to the group’s latest annual report, over 12 million shares were traded in 2014 generating turnover of just above P302 million.



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