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Anheuser-Busch InBev Raises Offer for SABMiller, But is it Enough?
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About a week ago, Anheuser-Busch InBev (BUD - Free Report) announced that the Justice Department will allow the corporation to pursue its acquisition of fellow beer maker SABMiller . The $106 billion offer has been under scrutiny by the DoJ, so InBev and SABMiller will have to meet some conditions in order for the deal to be approved. One of these mandates requires Anheuser to sell SABMiller’s US business to Molson Coors. The Justice Department was worried about the possible lack of competition which could arise since the combined companies would control about 30% of the global market for beer.
In the aftermath of the Brexit vote, the value of the deal has gone down significantly, and this is because of the fact that the offer was made in Pounds. To offset this, InBev is now making an offer of 45 Pounds per share, up from its previous proposal to buy the company for 44 Pounds per share. Activist investors have been putting more pressure on InBev to update its proposal, and the company’s latest offer may not be enough to keep SABMiller shareholders happy.
Since the Brexit vote, the Pound has lost over 10% of its value compared to the dollar. According to Fortune, the current offer is still makes the deal worth $2 billion less than what it was worth in November. Aberdeen Asset Management, a stakeholder in SABMiller, has voiced their disapproval of the new offer, saying that “the revised deal remains unacceptable”.
The firm has said that the current offer favors Altria (MO - Free Report) and BevCo. Those two companies own about 40% of SABMiller and they are opting for a cash and share offer, while most other investors will generally choose to take the all cash offer. They will opt for the all cash offer because under the cash and share offer, investors have to agree to hold their new shares for five years before choosing to sell them.
The devaluing of the pound has threatened the profitability of smaller shareholders, as they will most likely choose to receive an all cash offer in exchange for their SBMRY stock. Because Altria and BevCo are opting to receive shares in addition to cash, the level of profitability lost from a merger (compared to the value of the deal in October) is not as severe. It will be interesting to see whether or not the offer becomes adjusted to make the deal sweeter for smaller shareholders. As things stand though, they are getting less than whey they thought they would receive back in November.
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Anheuser-Busch InBev Raises Offer for SABMiller, But is it Enough?
About a week ago, Anheuser-Busch InBev (BUD - Free Report) announced that the Justice Department will allow the corporation to pursue its acquisition of fellow beer maker SABMiller . The $106 billion offer has been under scrutiny by the DoJ, so InBev and SABMiller will have to meet some conditions in order for the deal to be approved. One of these mandates requires Anheuser to sell SABMiller’s US business to Molson Coors. The Justice Department was worried about the possible lack of competition which could arise since the combined companies would control about 30% of the global market for beer.
In the aftermath of the Brexit vote, the value of the deal has gone down significantly, and this is because of the fact that the offer was made in Pounds. To offset this, InBev is now making an offer of 45 Pounds per share, up from its previous proposal to buy the company for 44 Pounds per share. Activist investors have been putting more pressure on InBev to update its proposal, and the company’s latest offer may not be enough to keep SABMiller shareholders happy.
Since the Brexit vote, the Pound has lost over 10% of its value compared to the dollar. According to Fortune, the current offer is still makes the deal worth $2 billion less than what it was worth in November. Aberdeen Asset Management, a stakeholder in SABMiller, has voiced their disapproval of the new offer, saying that “the revised deal remains unacceptable”.
The firm has said that the current offer favors Altria (MO - Free Report) and BevCo. Those two companies own about 40% of SABMiller and they are opting for a cash and share offer, while most other investors will generally choose to take the all cash offer. They will opt for the all cash offer because under the cash and share offer, investors have to agree to hold their new shares for five years before choosing to sell them.
The devaluing of the pound has threatened the profitability of smaller shareholders, as they will most likely choose to receive an all cash offer in exchange for their SBMRY stock. Because Altria and BevCo are opting to receive shares in addition to cash, the level of profitability lost from a merger (compared to the value of the deal in October) is not as severe. It will be interesting to see whether or not the offer becomes adjusted to make the deal sweeter for smaller shareholders. As things stand though, they are getting less than whey they thought they would receive back in November.
The Zacks Rank is a truly marvelous trading tool. Our ranking system has beaten the S&P 500, yielding an average return of 25% per year for the last 29 years! Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>