* 45 - The magic number?
Per Bloomberg, SABMiller is signalling that it may consider an offer of about
GBP 43-45 per share, although the valuation is still being discussed and will
also depend on the structure of the offer. The top end of this range (GBP 45)
is in line with a price cited in The Sunday Times (27 September). A price of
GBP 45 a share would represent a premium of 45% vs the 30-day average
share price (GBP 30.82) prior to recent market speculation and a 17%
premium vs the SABMiller all-time high. We would highlight that the premium
that InBev ultimately paid for Anheuser-Busch in 2008 (USD 70 per share)
represented a 45% premium to AB’s unaffected share price.
* Part debt, part equity financing – see sensitivities below
Per Bloomberg, Anheuser-Busch InBev (ABI) is working to arrange total
financing of USD 50-70bn. This would imply a debt/equity split (at GBP 45
per share) of between 45% and 64%. See sensitivities below based on a
share price between GBP 43-47 and a 50/50 debt/equity financing
component. We assume disposals (US and China for 10x and 16x EBITDA
respectively), synergies (USD 2bn by year three), a tax rate of 25%, and an
interest coupon of 4%.
* Negotiations still “friendly”
It is interesting that negotiations would appear to be “friendly”, as opposed to
hostile, and that ABI’s intention is to work with SABMiller’s board towards a
recommended transaction. We believe that this reflects the tacit support of
SABMiller’s largest shareholder Altria (27% stake), with Altria having been
brought over the wall ahead of the approach to SABMiller (note The Sunday
Times on 20 September suggested that Altria is "angling for a sale").
Further, we believe that a friendly approach is more likely to lead to cooperation
with regards to SABMiller’s numerous associate and JV partners.
* SABMiller (Buy) – continue to own
While there are a number of potential loose ends and the recently appointed
heavyweight chairman, Jan du Plessis, is likely to put up a strong bid
defence, we see no obvious white knight or poison pill that might prevent the
deal from taking place.
* ABI (Neutral) – await further details on deal terms
ABI has an enviable record for value creation on transactions following the
BUD and Modelo deals. With the controlling Brazilian and Belgian families
ultimately behind the timing of the SABMiller approach, we believe that any
approach would be well thought out for longer-term value creation. However,
until further deal terms are clarified (ultimate price, form of consideration,
synergies, disposals, interest, tax), we remain on the sidelines.
* Ownership structure
52.6pc of ABI shareholders are represented on ABI's board. This drives an
ownership culture and long-term view. It is hard to over-estimate the
importance that ABI assigns to this ownership structure. We see a potential