Tobacco company Altria Group Inc.(MO - Analyst Report) holds a 27% stake in SABMiller Plc , the world’s second-largest brewer by volume. This gives the company diversity and an edge over its peers. Additionally, the considerable amount of ownership in the beer company gave Altria a driving role in the megadeal between world’s leading distiller Anheuser-Busch InBev (BUD - Snapshot Report) and SABMiller. Shares of Altria gained after majority of shareholders of SABmiller voted for the $103 billion deal.
AB InBev and SABMiller had reached an agreement to create the “first truly global beer company,” back in Oct 2015. The deal is expected to close in Oct 2016. Per the terms of the deal, Anheuser Busch will offer SABMiller’s biggest investor — Altria a combination of cash and Anheuser-Busch's own stock. This implies that Altria will receive a higher stake in the combined AB-Inbev-SABMiller transaction than it would have in the event of a merger of equals where no premium is granted.
While common shareholders of SABMiller will get $67.59 a share, SABMiller’s biggest investor, Altria will receive cash of about $60 per share (GBP 43.50 per share) with partial shares alternative, according to the deal. The cash represents a 48% premium to SABMiller’s closing price as on Sep 14 (the last business day prior to renewed speculation of an approach from AB InBev).
We note that ever since the announcement, AB InBev and SABMiller have worked together in clearing the regulatory hurdles around the world, making an integration plan and executing AB InBev’s bond financing program. In order to clear the antitrust requirements AB InBev agreed to sell SABMiller’s 58% stake in Miller Coors to Molson Coors Brewing Company (TAP - Analyst Report) .
This collaboration is likely to benefit both the companies by bringing their individual solid brand portfolios together and also expanding their robust geographical reach to serve all major beer markets that have sturdy growth potential.
SABMiller is a non-core business and some investors believe that a takeover bid from Anheuser-Busch would be Altria's best opportunity to make cash out of the SABMiller stake at a maximum profit.
The Marlboro maker was left with 27% share in SABMiller after it sold 9% of its stake to South African Breweries plc for $3.6 billion in stock in 2010 after Altria spun off Philip Morris International Inc. (PM).
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