Takeovers

Miller Rejects $104 Billion Takeover Offer From Budweiser

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SABMiller has rejected a third takeover offer from US-Belgian rival AB InBev that values the beer maker at $103.9 billion (£68 billion).

Brewing giant AB InBev went public with a takeover offer for London-listed rival SABMiller on Wednesday, revealing it already had two bids knocked back by management.

But SABMiller put out a statement just hours later saying the board "unanimously rejected" the offer because it "substantially undervalues SABMiller, its unique and unmatched footprint, and its standalone prospects."

US company AB InBev is the world's largest beer maker, responsible for brands like Budweiser, Corona, and Stella Artois, while SABMiller is the second-largest brewer in the world and makes beers like Fosters and Grolsch.

AB InBev set out details of its £42.15 ($64.30) per share offer in a statement on Wednesday.

The latest offer values SABMiller at £68.14 billion ($103.9 billion) and AB InBev says the SAB board has already rejected offers at £38 ($57.96) per share and £40 ($61) per share. SAB shares closed at £37.28 ($56.86) in London on Tuesday.

But SABMiller signaled pretty quickly that it would likely reject the deal. In a statement from the company shortly after AB InBev's offer, SAB said management has already met to consider a £42 a share offer speculatively floated by AB InBev earlier in the week, but it had concluded that "it still very substantially undervalues SABMiller."

SABMiller's chairman Jan du Plessis says in the statement (emphasis ours):

SABMiller is the crown jewel of the global brewing industry, uniquely positioned to continue to generate decades of standalone future volume and value growth for all SABMiller shareholders from highly attractive markets.

AB InBev needs SABMiller but has made opportunistic and highly conditional proposals, elements of which have been deliberately designed to be unattractive to many of our shareholders. AB InBev is very substantially undervaluing SABMiller.

SABMiller shares jumped over 3% in London on news of the bid but have come crashing back down after the rejection. Share are currently up around 0.9% at 1.18 p.m. BST (8.18 a.m. ET).

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AB InBev said this morning that it is "disappointed" that SAB dismissed its two earlier offers "without any meaningful engagement." SAB shares dropped on Tuesday amid rumors that management was planning to fight any takeover offer.

AB InBev may well have gone public with this latest offer to try and drum up some shareholder pressure on SABMiller to at least engage in deal talks. The company has even gone so far as tocreate a fancy corporate website espousing the virtues of the deal, complete with corporate video of CEO Carlos Brito making the case.

The charm offensive did some good. SABMiller's largest shareholder, Altria, put out a statement on Wednesday morning saying it supports the deal and "urges SABMiller’s board to engage promptly and constructively with AB InBev to agree on the terms of a recommended offer."

Clearly, SAB's management didn't listen.

News of AB InBev's courtship of SAB first broke in mid-September, but this is the first concrete offer we've had.

AB InBev CEO Carlos Brito says in this morning's statement:

We have the highest respect for SABMiller, its employees and its leadership, and believe that a combination of our two great companies would build the first truly global beer company.

Both companies have deep roots in some of the most historic beer cultures around the world and share a strong passion for brewing as well as a deep seated tradition of quality. By bringing together our rich heritage, brands and people we would provide more opportunities for consumers to taste and enjoy the world's best beers.

AB InBev argues in its offer document that a merger would "generate significant growth opportunities from marketing the companies' combined brand portfolio through a largely complementary distribution network."

AB InBev also confirmed earlier today it doesn't yet have the support of BevCo for the bid. BevCo owns 15% of SABMiller.


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