SABMiller Board Backs AB InBev's Higher Offer

SABMiller PLC's board on Friday recommended that shareholders approve Anheuser-Busch InBev NV's increased offer of GBP45 a share, bringing an end to several turbulent weeks that jeopardized a more than $100 billion combination of the world's largest brewers.

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The board's decision to recommend the deal came on the same day that Chinese regulators approved the merger. The approval by China's Ministry of Commerce, which was expected, was the final regulatory precondition AB InBev needed before moving forward with the transaction.

AB InBev shareholders and SABMiller shareholders now must vote on the deal, which is expected to close this year.

Shares of AB InBev, the world's largest brewer, rose 4.6% in trading in Brussels, while SABMiller's shares added 2.1% in London.

"In reaching its decision, the board has considered the best interests of the company as a whole and has taken into account all salient facts and circumstances. The board has also received extensive shareholder feedback and considered the views of our financial advisers," SABMiller Chairman Jan du Plessis said in a statement.

He called the decision as "difficult" and "challenging" in the wake of last month's vote by the U.K. to leave the European Union.

AB InBev on Tuesday raised its offer for SABMiller PLC to GBP45 a share, from GBP44 a share, trying to quell growing unease among SABMiller shareholders after the British pound's plunge. The deal became a target for activist investors and traders after the U.K. voted to leave the European Union last month.

The recent turmoil around the AB InBev-SABMiller deal illustrates how the U.K. vote has rocked global businesses. The subsequent descent of the British pound caused the value of AB InBev's cash offer to SABMiller to fall below its cash-and-share offer because AB InBev shares are priced in euros. The discrepancy raised alarm among shareholders and board members.

The turmoil proved costly for AB InBev, forcing it to raise its offer by about $2 billion and adding to losses from its decision last December to hedge its exposure to the British pound. With the currency falling by more than 10% against the dollar, the hedge has cost AB InBev an estimated $10 billion, according to Susquehanna International Group LLP.

The sweetened offer won support from both of SABMiller's largest shareholders, U.S. tobacco company Altria Group Inc. and Colombia's Santo Domingo family. Both plan to take the cash-and-share proposal. In addition, SABMiller's own board of directors have committed their shares to the deal, according to AB InBev Chief Executive Carlos Brito.

The rest of the board remained concerned about AB InBev's sweetened offer, a person familiar with the matter said. In an effort to get an independent opinion on the offer, Mr. du Plessis brought on Centerview Partners Holdings LLC and offered it a flat fee to provide financial advice on the new offer, a person familiar with the decision said.

At least two shareholders, including Aberdeen Asset Management PLC, opposed the new offer, but as the week passed, other shareholders embraced it. David Simon, chief executive of SABMiller shareholder Twin Capital Management LLC, supported it and said those who opposed it were "being too shortsighted."

The board's recommendation clears the way for the shareholder votes, the next step in the process. Mr. du Plessis said the company would ask the U.K. court to have Altria and the Santo Domingo family vote on the deal as a separate class of shareholders.

Buying SABMiller will give AB InBev access to the fast-growing African beer market as well as certain attractive Latin American markets like Peru and Colombia, while reducing its dependence on slower-growth markets like the U.S. and Brazil.

AB InBev had agreed in March to sell SABMiller's China business to China Resources Beer Holdings Co. The $1.6 billion deal would give the government-controlled brewer SABMiller's 49% interest in the joint venture known as CR Snow and full ownership of Snow, the world's top-selling beer by volume.

Taking over Snow would make China Resources the largest brewer in China, with a 30% market share, according to industry tracker Seema International Ltd. AB InBev has an estimated 18% market share in China, while Tsingtao Brewery has 22%, Beijing Yanjing Brewery Co. has 13% and Carlsberg A/S has 6%.

China's Ministry of Commerce is the fourth and final major regulator to approve the combination of the world's two largest brewers. The deal also was contingent upon approval in the U.S., Europe and South Africa.

By Tripp Mickle and Saabira Chaudhuri

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