AB InBev faces delicate balance in structuring SABMiller bid
By Philip Blenkinsop and Martinne Geller
BRUSSELS/LONDON (Reuters) - A $70 billion debt package being arranged to fund Anheuser-Busch InBev's (ABI.BR: Quote) takeover of SABMiller SAB.L still leaves the world's largest brewer with a tricky balancing act in satisfying a range of shareholder camps with different needs.
SABMiller's two major shareholders face potential capital gains taxes, so may want to get paid in shares - which would conflict with AB InBev's controlling shareholders' desire to limit the dilution to their control that would come with issuing new shares.
Furthermore, some shareholders might have geographical restrictions tied to the location of the share listing.
Marlboro maker Altria (MO.N: Quote) and the Santo Domingo family of Colombia together own 42 percent of SABMiller, and are widely believed to prefer shares in an enlarged company rather than cash, to avoid triggering capital gains taxes on the proceeds of their stakes, worth about $24 billion and $13 billion, respectively, at current prices.
"We can say with confidence that Santo Domingo and Altria will want a decent chunk of equity, probably the majority," said Exane BNP Paribas analyst Eamonn Ferry. "The wild card is how much of the free float would want equity too," he added, referring to shareholders beyond the major two.
AB InBev, maker of Budweiser, Stella Artois and Corona, is expected to have offered between 40 and 45 pounds per share for its nearest rival within the next two weeks. It is already asking banks to underwrite up to $70 billion in debt financing, sources have told Reuters.
With a deal therefore costing as much as $110 billion, that leaves a likely share issue of as much as $40 billion, a ratio that roughly fits the 60/40 split expected by analysts, who note the Brazilian and Belgian founding families of AB InBev, who own 52 percent of its shares, would not want to largely dilute their control by issuing too much new equity.
"It is hard to over-estimate the importance that ABI assigns to this ownership structure," said Nomura analysts earlier this month. "This drives an ownership culture and a long-term view." Continued...