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SABMiller awaits Chinese approval before granting AB InBev nod

By News Express on 22/07/2016

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SABMiller chairman Jan du Plessis said on Thursday the board would write to shareholders with its recommendation on the Anheuser-Busch InBev (AB InBev) offer as soon as the megabrew merger received clearance from the Chinese regulators.

Du Plessis told shareholders at the company’s annual general meeting the board would take into consideration the effect of the drop in sterling since the Brexit vote at the end of June in its recommendation.

None of the shareholders attending the meeting indicated they wanted the board to put pressure on AB InBev to lift its £44 cash offer price. But some shareholders said they would like the opportunity to swap their SABMiller shares for AB InBev shares.

Thursday’s meeting will be SABMiller’s last if the $107bn megabrew merger continues on track for completion. The annual meeting took place just hours after the US regulatory authorities gave conditional clearance for the transaction.

The main condition imposed by the US justice department requires SABMiller to sell its 52% stake in MillerCoors to its US joint venture partner, Molson Coors.

Commenting on the US approval, AB InBev CEO Carlos Brito said: "We have taken a significant step forward on the transaction, which will create the world’s first truly global brewer."

It may be a global brewer, but it will not be the colossus initially imagined.

The US disposal condition follows on the EU commission’s requirement that SABMiller sell all of its European beers including heavyweights such as Pilsner Urquell, Peroni and Grolsch.

And, although the Chinese authorities have not formally approved the merger, AB InBev has already commenced the sale of SABMiller’s 49% stake in China’s CR Snow, the world’s biggest beer seller by volume.

The disposals are expected to generate a combined income of about $21.5bn for AB InBev that will go a little way to offsetting the $108bn cost of the mega-brew deal.

The forced sale of so many of SABMiller’s beer brands is expected to cut about 140-million hectolitres from the company’s annual beer sales of 250-million hectolitres. The biggest volume hit will come from the disposal of Snow whose low-margin business contributed annual sales of 58-million hectolitres.

Despite being gutted by the various regulators, the merged entity will still be the largest global beer group by a long shot, but its global market share may not make it to 25%, let alone the 30% touted initially.

It is likely that AB InBev’s willingness to accept the disposal conditions is because none of them applied to SABMiller’s emerging markets that were key to AB InBev’s decision to move on SABMiller.

However, the trading update released ahead of Thursday’s meeting may have dulled Africa’s attraction. For the first time in recent memory Africa, apart from SA, Nigeria and Zambia, was one of the weaker performers in the group.

Asia-Pacific and North America also reported weak volumes. Latin America continued to be a star performer and Europe recovered well from a weak comparative period.

With the US approval now secured, the only outstanding condition remaining is approval from the Chinese authorities.

There has been no indication on the timing of the Chinese decision, but analysts have said AB InBev could waive this condition if necessary.

•Photo shows SABMiller Chairman Jan du Plessis.

Source News Express

Posted 22/07/2016 5:09:31 PM


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