AB InBev (NYSE: BUD) raised its over $100 billion bid for competitor SABMiller on Tuesday after the pound depreciate following the Brexit vote made the offer less attractive for many investors, threatening to derail the deal.
AB InBev, the Belgian-based beer giant, lifted its cash offer from £44 per share to £45 per share, to appease many of London-based SABMiller’s shareholders, who have watched the value of the offer fall along with sterling. It also tweaked the terms of an alternative cash and stock structure designed for SABMiller's two largest shareholders, raising the cash element by £0.88 per share.
After the raise bid and the appreciate in the euro against the pound, the partial-share offer is now worth £51.14 based on Monday’s closing prices, compared with £41.85 in November when both sides formally agreed on the deal. The partial-share deal is technically open to all shareholders, but it comes with a five-year lockup that is unattractive for many investors.
“The revised deal remains unacceptable,” the investment firm said, “as it both undervalues the company and continues to favor SABMiller’s two major shareholders.” It said that in the absence of a better offer, it was content to stay a shareholder in SABMiller as a stand-alone firm. Aberdeen owns 1.2% of SABMiller.
During Tuesday trading, SABMiller shares decreased 0.3% to £44.26 in London after an earlier modest up. AB InBev shares increased 0.6% to €115.50 ($126.83) in Brussels. Bernstein Research brewing analyst Trevor Stirling said SABMiller's shares would probably drop to 41.50 pounds if AB InBev's takeover bid failed.
These two brewing giants had expected to close their acquisition in the second half of 2016. The deal has already been approved by competition authorities in the U.S., the European Union, South Africa and several other jurisdictions, leaving Chinese approval the last big antitrust hurdle to the combination.
This acquisition is important for AB InBev’s development. Buying SABMiller allows AB InBev to reduce its reliance on the U.S., where it has had trouble getting younger people to drink more Budweiser, and gives it access to the growing African market, which is expected to drive beer-industry sales.