Investor Event

Bid for SABMiller (SAB) Queried

This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

One of my contacts has questioned what is happening in the bid for brewer SABMiller by AB Inbev. Here is what he had to say: “The concern raised is that here appears to be a really anomalous situation which is in danger of setting a terribly bad precedent.

The two largest shareholders in SAB Miller are Altria (Philip Morris) and the Santo Domingo family of Colombia. They have agreed to a deal for beneficial tax reasons (to them) whereby they accept a partial share offer (‘PSA’) with a smaller amount of cash. The shares they will get are unlisted and have a 5 year lock-up, plus various other onerous restrictions which make it impossible for almost any other shareholders to accept this. The rest of the shareholders get cash.

However, the currency and relative share price moves, exacerbated by the Brexit vote, mean that the PSA is now worth very substantially more (around 20% more) than the cash offer. Thus we have a situation where two favoured, strategic shareholders are getting a deal worth 20% more than the rest of the market.

This is surely a worrying precedent. Consider an extreme example: imagine if the Qatar sovereign wealth offered to pay a higher price in a buyout to anyone who was prepared to move their headquarters to Doha!”

Do private investors have any views on this matter? If they do please let ShareSoc know.

ShareSoc’s view is normally that all shareholders should be treated equally. The current structure disadvantages retail investors and pension funds alike and benefits two ‘strategic’ investors only.

Roger Lawson

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