If there is one thing U.K.-listed SABMiller can count on when it comes to rival Anheuser-Busch InBev, it's the company's persistence. The Brazilian beer company will not be deterred from its plan to merge the two groups to form the world's largest brewer, with roughly half of global market share by volume.
Frustrated by what it believes were summary rejections of two previous offers it had advanced privately, AB InBev is raising its offer once more and taking it public, enjoining SABMiller's shareholders to support it.
The latest offer of 42.15 pounds per share, values AB InBev at 72 billion pounds on an enterprise basis (i.e., including net debt) and represents a 44% premium to the "undisturbed" share price on Sept. 14.
Manifestly, there is a difference of opinion between the two parties on that price: SABMiller declared that the offer "very substantially" undervalues the company; meanwhile, AB InBev chief executive said, "with the put up or shut up deadline approaching, we thought it important for SABMiller shareholders to understand ... it's an amazing price."
(The "put up or shut up" deadline refers to the Oct. 14 deadline for AB InBev to confirm or deny that it would make a formal takeover offer, in compliance with the Takeover Code that is law in the U.K.)
In different respects, both parties are correct in their assessment of the price.
Many acquisitions destroy shareholders' equity, but AB InBev has an exceptional record in this area -- the hand behind this juggernaut is Brazilian investment group 3G Capital, wizards at acquiring and improving companies in the branded food and drinks sector. AB InBev's odyssey began with a $50 million investment in a local brewer. In some sense, that scale of value creation is indicative that AB InBev (or, rather, its predecessors) is in the habit of buying undervalued assets.
On the other hand, SABMiller's current price of GBP 36.33 already represents a 34% premium to the mean enterprise value to next-12-months' EBITDA multiple for its peer group of Europe Beverages companies, according to data from Bloomberg. At the 42.15 pound offer price, the premium is close to 40%. I'm not sure if that qualifies as "amazing," but it certainly looks like a healthy premium.
Speaking of the discount between the current share price and the offer price, it looks like a rich spread to me. I expect this deal to ultimately be completed. I certainly wouldn't bet against these Brazilians; they're very thirsty.