SABMiller Board Recommends AB InBev's Improved Takeover Offer

SABMiller Plc’s board unanimously recommended Anheuser-Busch InBev SA’s improved $104 billion takeover offer, paving the way for the biggest acquisition in the history of the beer industry and capping a tumultuous week in which the Budweiser maker bowed to pressure to sweeten its offer.

The board of London-based SABMiller proposed that its two biggest shareholders, Altria Group Inc. and Bevco Ltd., be treated as a separate class of stockholders and allow other SABMiller investors to vote on the new offer separately, the company said in a statement. AB InBev said it welcomed the recommendation, in a separate statement.

SABMiller’s board faced the choice of backing a bid that Chairman Jan du Plessis said was at the “lower end” of what he deemed acceptable, or risk letting the industry-transforming combination fall apart. AB InBev gave in to some investors when it raised its bid once more this week to factor in the pound’s plunge in the wake of the UK’s Brexit vote that put minority and institutional shareholders at a disadvantage.

“The board’s decision was difficult,” du Plessis said in the statement. “Various factors have affected the value of the offer, most importantly the impact of the Brexit vote on the value of sterling and the re-rating of comparable companies. This has made the Board’s decision more challenging.”

Shareholder Split Makes Acceptance ‘More Difficult’

SABMiller shares rose 2.1% to 44.14 pounds Friday in London, while AB InBev rose 4.6% to 115.30 euros in Brussels.

“I think this is a further step towards successful completion, but by splitting the shareholders into two groups, it makes it somewhat more difficult to gain the necessary level of acceptances,” Andrew Holland, an analyst at Societe Generale, said by phone. “You need a higher percentage of SABMiller shareholders to get it done than if the shareholders hadn’t been split into two groups.”

AB InBev’s latest cash offer was 45 pounds a share, 1 pound more than the prior proposal. It also increased the cash in a cash-and-stock alternative designed for Altria and Bevco, the value of which rose to more than 51 pounds a share after the pound’s plunge. The deal was tested after SABMiller suspended integration of the two brewers following resistance from shareholders who said they hadn’t been compensated enough for sterling’s fall.

But major SABMiller shareholders then signaled they favored AB InBev’s sweetened bid, which received a further boost Friday by getting regulatory clearance from China, the last major antitrust hurdle after it was approved in the U.S. and South Africa in recent weeks.

Complex Divestments

Part of the approval process includes a complex set of divestments around the globe. Molson Coors is set to acquire SABMiller’s stake in the MillerCoors brewing venture, while Japan’s Asahi Group Holdings Ltd. has agreed to buy the Peroni and Grolsch brands in Europe.

The deal to merge SABMiller and AB InBev, termed “Megabrew” by analysts, would create a behemoth controlling about half of the industry’s profits. The combined company will have the No. 1 or No. 2 positions in almost all of the world’s biggest beer markets, and provide AB InBev its first toehold in Africa, where about 65 million people are due to reach the legal drinking age by 2023.

By Manuel Baigorri, Ruth David and Thomas Buckley