Deals

Chris Hughes is a Bloomberg Gadfly columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

SABMiller's recommendation of AB InBev's $104 billion takeover bid shows how hard it is to derail a big deal once it is in train -- even when Brexit upends the financial logic of the transaction. This tie-up gained a momentum all of its own both inside the companies and in the markets.

In approving AB InBev's final 45 pounds-a-share offer, SABMiller's board admitted the price was at the "lower end of the range of values considered recommendable." That is a euphemism for confessing to having squeezed no more than the bare minimum for selling out.

The final deal is just 1 pound a share, or 2 percent, more than what was first agreed in November, since which time U.K. consumer stocks are up a far more impressive 14 percent.

Cheers!
AB InBev shares rallied ahead of SABMiller's capitulation to its revised takeover bid.
Intraday times are displayed in ET.

It's nevertheless a highly unusual admission in a takeover situation. This could reflect a view that walking away and reverting to a standalone strategy would be like unscrambling an egg, as so much work had already been done to make the tie-up happen. 

But it's a great shame that SABMiller management wasn't fired up about proving that by going it alone they could also get the share price to 45 pounds, and then some, given where peers are trading. 

The other issue was a sense of inevitability that a critical mass of investors wanted the deal. SABMiller's two big strategic shareholders, Altria and Bevco, with around 40 percent, had already backed AB InBev. The rest of the register seems to have attracted an increasing number of hedge funds supporting the deal for opportunistic reasons.

SABMiller said it will ask a U.K. judge to stage two separate shareholder votes -- one for the strategic investors and a second for everyone else -- a request almost certain to be granted given it's designed to prevent Altria and Bevco unduly influencing the approvals process. This is the right thing to do.

However, offering two votes probably won't change the outcome. There are doubtless enough merger arbitrageurs on the share register now to swing the second poll.

Plucky Aberdeen Asset Management plans to vote against the deal, but to have a chance of succeeding it would need to build a blocking stake with a massive club of fellow minority investors. There's little chance of that happening when SABMiller management isn't fighting to run the company standalone.

So there you have it. To buy a U.K. company, just get any deal agreed, the hedge funds will notice, and you can let momentum do the rest. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Chris Hughes in London at chughes89@bloomberg.net

To contact the editor responsible for this story:
Jennifer Ryan at jryan13@bloomberg.net