SABMiller-AB InBev: Don’t Bet on a Breakup
The world’s two largest brewers will probably still tie the knot
The beer has turned cloudy at the bottom of the bottle, but investors should drink up anyway.
When Anheuser-Busch InBev was offering £44 a share for SABMiller, shares in the U.K.-listed brewer traded above the bid price. Since ABI raised its offer to £45 Tuesday, the shares have fallen below £43.
This oddity follows an outburst of noise casting the long-awaited megamerger in doubt. Its most vocal opponent is Aberdeen Asset Management. It doesn’t like the two-tier structure, which involves a tax-efficient cash-and-unlisted-shares package for the largest two shareholders and a cash-only offer for the rest. For all the guff about governance, the real problem is that the Brexit vote devalued the pound, making the all-cash offer less attractive than the one that includes the unlisted shares.
But chances are the deal will still go through this year. And if that’s the case, there is a fairly low-risk 5% to be made by buying SAB shares now.
Aberdeen is the only investor that has publicly denounced the deal, and it owns just 1.17% of the company. Even if the two big shareholders are barred from voting on the cash-only component of the offer, as Aberdeen wants, it will hold less than 2% of the votes. That compares to a probable 25% threshold for overturning the merger. So it will need a lot of allies.
Activist hedge funds such as Elliott have also been pushing for a higher price. Tuesday’s £1 increase is underwhelming, but it is also explicitly final under U.K. takeover rules. Now activists have every interest in preserving the deal, without which brokerage Evercore estimates SABMiller’s share value at roughly £35. Elliott, which bought more SAB shares yesterday, is unlikely to second Aberdeen’s claim that it would be “more than happy” to remain a long-term shareholder.
On this occasion it makes sense to buy the doubt.