That’s because the slide in the pound has pushed the value of the cash-and-stock mix that two investors will get in Anheuser-Busch InBev’s takeover of the company to about £51.50 per SABMiller share — 17% above the £44 all-cash offer that the holders of a majority of shares will receive. When the acquisition was announced, the cash-and-stock alternative was valued at £39, a discount to the cash price.
AB InBev designed the so-called partial share alternative as a tax-friendly option for the two biggest SABMiller holders — Altria Group and BevCo — though the Belgian beer maker failed to include a clause that would limit the impact of currency swings on the £77.8bn deal for the UK brewer.
The catch is, the investors taking the cash-and-stock option have to hold on to their shares for five years, meaning its value could decline again.
"Whether or not there’s a threat to the deal in terms of fairness is a fascinating question and for AB InBev to have left that risk open is a surprise," Gardner Russo & Gardner’s Tom Russo said. Since the takeover was announced, Russo has sold most of his firm’s SABMiller holding and built an $800m position in AB InBev. "I’m pleased we had a chance to redeploy the cash from the deal. As for the specifics of the deal’s structure, it’ll be somebody else’s problem."
AB InBev shares fell 1.3% to €115.70 at 4.05pm in Brussels on Tuesday. SABMiller dropped 0.3% to £43.47.
AB InBev’s takeover of London-based SABMiller — set to be the largest corporate takeover in UK history — is one of many European deals muddied by the economic uncertainty following the Brexit vote. Whether it’s Revolution Bars scrapping the purchase of pubs in Scotland, or German regulators who do not want a combined European mega-stock exchange to be based in London, the UK’s decision to leave the EU has cast doubt far and wide.
Representatives for SABMiller and AB InBev declined to comment. AB InBev, based in Leuven, Belgium, is on track to close the combination in the second half of 2016, the company said last week, after obtaining approval from SA’s Competition Commission.
As part of the offer, AB InBev is willing to issue enough shares to cover the demand from tobacco maker Altria and BevCo, the holding company for Colombia’s Santo Domingo family, who have a combined 40.4% stake, though any investor can ask for cash and stock. The shares won’t be listed on any exchange for five years, and can’t be traded or transferred during that period, which may deter most fund managers from choosing the partial share alternative, or PSA.
"It’s tough to judge whether the deal structure’s fair," Thorsten Winkelmann, a fund manager at Allianz Global Investors, said. "An institutional investor managing mutual funds will always find it tough to go for the PSA and the reaction of the pound was surely not in AB InBev’s consideration when they struck the deal."
Bloomberg
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