Britain’s decision to leave the EU has complicated a slew of deals. In the latest twist, the plummeting pound is creating an unintended premium for a select few shareholders in SABMiller Plc.
Under the terms of Anheuser-Busch InBev NV’s $103 billion takeover offer, SABMiller investors can choose 44 pounds a share in cash or a mix of cash and stock that was valued at just over 39 pounds a share when the deal was announced in October. The partial share alternative was a tax-friendly option designed for SAB’s two biggest shareholders, Altria Group Inc. and BevCo Ltd. But the pound’s drop against the euro has pushed its value to about 51.50 pounds a share, 17 percent above the cash offer.
The catch is, investors taking the cash-and-stock option have to hold on to their shares for five years.
“Whether or not there’s a threat to the deal in terms of fairness is a fascinating question and for AB InBev to have left that risk open is a surprise,” said Tom Russo, who manages $10 billion for Gardner Russo & Gardner. Since the takeover was announced, Russo’s sold most of his firm’s SABMiller holding and built an $800 million position in AB InBev. “I’m pleased we had a chance to redeploy the cash from the deal. As for the specifics of the deal’s structure, it’ll be somebody else’s problem.”
AB InBev’s takeover of London-based SABMiller -- set to be largest corporate takeover in U.K. history -- is one of many European deals muddied by the economic uncertainty following the Brexit vote. Whether it’s Revolution Bars scrapping the purchase of pubs in Scotland, or German regulators who don’t want a combined European mega-stock exchange to be based in London, the U.K.’s decision to leave the EU has cast doubt far and wide.
Representatives for SABMiller and AB InBev declined to comment. AB InBev, based in Leuven, Belgium, is on track to close the combination in the second half of 2016, the company said last week, after obtaining approval from South Africa’s competition authority.
As part of the offer, AB InBev is willing to issue enough shares to cover the demand from tobacco maker Altria and BevCo, the holding company for Colombia’s Santo Domingo family, who have a combined 40.4 percent stake. The shares won’t be listed on any exchange for five years, and can’t be traded or transferred during that period, which may deter most fund managers from choosing the partial share alternative, or PSA.
“It’s tough to judge whether the deal structure’s fair,” Thorsten Winkelmann, a fund manager at Allianz Global Investors, said by phone. “An institutional investor managing mutual funds will always find it tough to go for the PSA and the reaction of the pound was surely not in AB InBev’s consideration when they struck the deal.”
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