In September, when global beer brewer Anheuser-Busch InBev (AB InBev) made its first approach to the Board of SABMiller to buy the company, it was probably the first time many South Africans had even heard of the Belgium-listed company. Although you may be more familiar with its global beer brands, Corona, Budweiser and Stella Artois.
Who is AB InBev?
AB InBev is the largest global beer brewer in the world, and accounts for nearly a fifth of the global beer market. SABMiller comes in second with just over 12% of the global beer industry. Together the new company will completely dominate the beer industry, accounting for one out of every three beers purchased. The closest contenders would be Heineken and Carlsberg at 8% and 6% respectively.
The acquisition of SABMiller provides AB InBev access to markets SABMiller currently dominates, such as Africa, Latin America (other than Brazil), as well as Eastern Europe and Australia, making it a truly global beer company.
What will the deal mean for Castle?
Fortunately, it is highly unlikely that AB InBev will close successful local brands, although their overall strategy is to have global brands rather than local brands, so expect to see more marketing of Corona, Budweiser and Stella Artois in South Africa, alongside the existing brands. Currently, SABMiller has around 90% of the South African market, with AB InBev’s brands still minuscule in comparison, which provides growth opportunities for the AB InBev brands. On the other hand, many European and South American countries as well as the USA may become more familiar with Castle and Black Label.
Long term, we might see some brand rationalisation as they close some of the smaller brands.
Can I own shares in the new company?
The second question is whether SABMiller will still be South African. Actually SABMiller has been a UK-domiciled company with a South African subsidiary and secondary listing on the JSE for some time now. AB InBev has stated that they will retain a listing on the Johannesburg Stock Exchange to allow South African shareholders to own a share in the larger group without having to use their offshore allowance.
What is the deal?
That brings us to the actual deal. On 14 September SABMiller was trading on the London Stock Exchange at £29.34. On 17 September 2015, AB InBev made a private proposal to the board of SABMiller for £38 per share and revised that offer to £40 per share. A final cash offer of £44.0 was made on 11 November – subject to meeting regulatory approval.
This represents a 50% premium above where SABMiller was trading on 14 September, the day before the speculation of an approach from AB InBev. So existing SABMiller shareholders will make a good return from accepting this deal. The transaction is only likely to be concluded in the 2nd half of 2016.
In terms of our Stanlib funds, we would sell our SABMiller shares and decide post the deal if the enlarged group is worth owning. We like beer as an investment, but only at the right price. |
