LONDON (Reuters) - Brewer SABMiller Plc SAB.L announced an expanded cost-cutting plan on Friday, stepping up its defense against an unsolicited $100 billion takeover offer from bigger rival Anheuser-Busch InBev (ABI.BR).
The 30-page presentation posted on the website of the world’s second-largest brewer was seen as an attempt to prise a higher price out of AB InBev two days after it rejected its proposed main cash offer of 42.15 pounds a share.
“SAB’s move now puts the ball firmly back into AB InBev’s court,” analysts at Barclays said.
On a day the heads of both companies were meeting with SAB shareholders, SAB said it now expects to reach annualized cost savings of at least $1.05 billion by 2020. The prior target for its savings program, announced in May 2014, was $500 million by 2018.
“They want a higher price and they’re arguing for it,” said Berenberg analyst Javier Gonzalez Lastra. “It doesn’t change much. I think most people think ABI could realise synergies of $2 billion or more,” he said.
Later on Friday two major institutional shareholders issued statements supporting SABMiller’s stance.
Poland’s Kulczyk Investments, which has a 3 percent stake in SABMiller, said AB InBev’s proposal “does not reflect SABM’s standalone growth potential.”
Aberdeen Asset Management ADN.L, which has a 1.8 percent stake, said the offer “significantly undervalues” SABMiller.
“AB InBev’s bid for SABMiller is welcome, as it draws attention to the company’s undervaluation, but the bid is opportunistic and Aberdeen will not support the current offer,” said Devan Kaloo, head of global emerging markets, equities.
“AB InBev need to rethink their numbers.”
AB InBev is renowned for its ruthless cost-cutting, austere culture and industry-leading profit margin, which stood at 39.4 percent last year. In its presentation SAB stressed that its top 20 markets already had a margin of 38 percent in aggregate, though its overall margin last year was 29.5 percent.
Industry sources have said that if SAB were swallowed by AB InBev, it was likely it would have to adopt a more centralized operating structure.
SAB, whose brands include Peroni, Grolsch and Pilsner Urquell, said on Friday it was already moving in that direction, with about 70 percent of its additional savings coming from procurement and the rest from manufacturing and distribution.
“We are continuing to remove duplication across markets, bringing specialist expertise in areas like procurement under one roof, and standardizing common processes,” said Chief Executive Alan Clark in a statement.
“It results in our markets being freed up to concentrate on what they do best - growing revenue with local consumers and customers.”
SAB’s response came after Carlos Brito, his counterpart at AB InBev, made repeated calls on SABMiller shareholders to get Clark and his co-directors to start “proper discussions” with AB InBev.
“Notwithstanding our good-faith efforts, the board of SABMiller has refused to meaningfully engage with us,” Brito said on Thursday.
Brito met with investors in New York on Friday, after meetings in London on Thursday. Clark was also meeting shareholders on Friday.
SAB said AB InBev’s latest offer had “very substantially undervalued” the company.
AB InBev had no comment on SAB’s presentation.
Additional reporting by Noor Zainab Hussain in Bengaluru; Editing by Keith Weir, Greg Mahlich and Adrian Croft