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Currency flaws in blockbuster £77bn SABMiller deal in spotlight

July 17,2016 02:19

The biggest takeover in British corporate history has come under the spotlight since the Brexit vote, after sterling's plunge meant the terms of the £77bn deal increasingly favour SAB's two largest investors, which together own 40pc of the beer giant.


An influential shareholder advisory firm has weighed into the brewing shareholder dispute over Anheuser-Busch InBev’s blockbuster takeover of SABMiller.
Institutional Shareholder Services (ISS), a major corporate governance adviser to fund managers, has warned there is a “material difference” between what SAB’s two largest investors - tobacco firm Altria and Colombia’s Santo Domingo family - are being offered and what other SAB shareholders stand to receive.
The biggest takeover in British corporate history has come under the spotlight since the Brexit vote, after  sterling’s plunge meant the terms of the £77bn deal increasingly favour SAB’s two largest investors, which together own 40pc of the beer giant.
ISS’s comments come after one top ten investor told The Sunday Telegraph last week they questioned whether AB InBev’s offer “is still a good deal for all shareholders”.
Activist hedge fund Elliott  has also acquired a 1.47pc SAB stake, spurring speculation it might agitate for better terms from Stella Artois-owner AB InBev. ISS has now questioned whether Altria and the Santo Domingos will be excluded from voting on part of the deal, making it easier for other shareholders to oppose the takeover if they wished. 
The complex AB InBev offer comes in two-parts. The first is an all-cash offer worth £44-per-share. The second is an offer of unlisted AB InBev stock that must be held for five years plus a small amount of cash. This so-called Partial Share Alternative (PSA) was worth £39.03 when the takeover was agreed last October, but because of sterling’s recent drop is now valued at about £49.86. Altria and the Santo Domingos have already pledged to accept the PSA. AB InBev has admitted the PSA is designed specifically for the two investors, to soften the tax hit they would suffer if they took an all-cash offer. 
Although the PSA is also open to all other SAB shareholders, because most fund managers would find it hard to hold the unlisted stock they are instead expected to accept the all-cash offer. There is growing frustration, however, that the PSA is now worth 13.3pc more than the cash offer most shareholders will be forced to accept.
ISS said: “If the option between cash and PSA was a real one, then the shares in the PSA would have been unrestricted, listed ones. As there is now a material difference between the values of the two forms of consideration, however, to the benefit of SAB’s core shareholders [Altria and the Santo Domingos], should those core shareholders be allowed to vote on the all-cash offer that was intended for institutional investors?”
A court will decide on the issue. A shareholder vote will be held once AB InBev has received regulatory clearance for the deal in the US and China.
SAB declined to comment.
 

Standard,SABMiller,Business,Banks and Finance,Retail and Consumer industry,Companies,AB InBev

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