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AB InBev (BUD) Nears Closing Mega Merger with SABMiller

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The world's two largest brewers, Anheuser-Busch InBev SA/NVBUD , alias AB InBev, and SABMiller plc SBMRY are on track with their mega-merger deal, having cleared the regulatory hurdles in the European Union, South Africa, the U.S. and China. The companies have come up with a timetable for the series of events before finally closing the merger transaction on Oct 10, 2016.

The timetable set out for approaching the mega combination includes the publication of merger terms on Aug 2, the U.K. Scheme Directions Hearing on Aug 22, publication of other key transaction documents on Aug 26, shareholder meetings of AB InBev, SABMiller and Newbelco as well as U.K. Scheme Court meeting on Sep 28, U.K. Scheme Court Sanction Hearing and last day of dealings in SABMiller shares on Oct 5, and the closure of the deal on Oct 10.

Now, a major hurdle in the progress of the deal is the U.K. court hearing (U.K. Scheme Directions Hearing) on Aug 22, which will ponder on SABMiller's proposal to divide its shareholders in two classes and have each class vote separately for the deal. With this proposal, SABMiller intends to divide its largest shareholders, Altria Group Inc. MO and BEVCO, which together hold 41% of SABMiller's stakes, into a separate class.

Last week, SABMiller's board of directors accepted the Budweiser owner's revised and final offer of GBP 45 per share (up from GBP 44 per share), with the condition that the former's shareholders will be divided into two classes. Accordingly, AB InBev put forward two variants of its offer - one, the already-stated GBP 45 per share for majority shareholders and two, a cash-and-shares offer for the company's largest shareholders.

This brings a disparity in the both the offers as the cash-and-shares bid has a higher value than the cash offer, even though the newly-issued shares have an expiry date of five years.

Though the shareholder votes on the deal are scheduled for Sep 28, SABMiller's largest shareholders have already expressed their support for the deal.

AB InBev and SABMiller had reached an agreement to create the "first truly global beer company," back in Oct 2015. The combined entity is likely to control about one-thirds of the global beer market, leaving behind Heineken NV HEINY .

Ever since the announcement, the companies have worked together in clearing the regulatory hurdles around the world, making an integration plan and executing AB InBev's bond financing program.

We believe that this collaboration is likely to benefit both the companies by bringing their individual solid brand portfolios and innovative teams together. Also, their robust geographical reach would enable the combined giant to serve all major beer markets that have sturdy growth potential.

With the combination of AB InBev's Budweiser, Stella Artois and Corona with SABMiller's Castle Lager, the merged company will be well positioned to grab every opportunity in the fast-growing African and new Latin American markets. Thus, this combined firm with a stronger network and enhanced brand structure would boost shareholder value, and cater to consumers of both entities by offering them a wider assortment.

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The share price of AB InBev closed down 3.3% at $125.23 in the last trading session.

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ANHEUSER-BU ADR (BUD): Free Stock Analysis Report

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HEINEKEN NV (HEINY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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