AB InBev's 12-month journey to acquiring SABMiller has been a strange and difficult one. On the way, the Belgian brewer has set precedents likely to change the course of dealmaking in the U.K. and globally.
- First, the deal has confirmed that British takeover rules allow bidders to design takeovers to favor big shareholders, potentially at the expense of everyone else. InBev's 45 pounds-a-share cash offer, approved by SAB shareholders today, comes with a cash-and-shares alternative specifically designed to be tax efficient for the maker of Castle lager's two biggest investors.
This alternative offer contained an inbuilt deterrent for other shareholders, a trading restriction on the stock component. U.K. takeover supervisors allowed this lopsided structure because all shareholders could, in theory, choose between the two options -- though many argued that in practice they could only accept the cash.
As a result, it's more likely now that other deals will contain comparable structures that enable big shareholders to steamroller little ones in deciding a company's future.
- Second, the SAB deal has clarified that it's possible for a U.K. bid target to split its shareholders into two groups and make any takeover conditional on both sets' approval. That's how SAB chose to address the favoritism problem arising from the double-headed offer structure. Here, the split vote gave minority shareholders extra leverage to block the deal if they wanted. Investors looking to disrupt future M&A and haggle for higher prices will feel emboldened.
- Third, the deal increases the likelihood that cross-border bidders will make offers in their own currency rather than the target's. InBev reports in dollars and arranged a 46 billion pounds ($60 billion) currency hedge for buying SAB's sterling-denominated shares. That hedge has generated a painful $9 billion accounting loss. Luckily for InBev, it saved a similar sum by getting away with not raising its bid to compensate for the pound's Brexit stumble. Future bidders will look at all this and ask if it might be easier just to make takeover offers in cash in their own currency, especially if it's the greenback. After all, no one blinks when foreign bidders offer shares in a different currency.
- Finally, the transaction reinforces some existing aspects of deal-making. It showed that the U.K.'s sometimes maligned four-week deadline for bidders firming up an offer is no barrier to even the biggest and trickiest deals. Likewise, it's a reminder that the top two players in an industry can combine if they put their minds to it. As with cement giants Holcim and Lafarge, the brewers' CEOs seem to have thought: if we're going to do a deal, let's push ambition to the max.
All InBev has to do now is show it hasn't overreached.
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 email@example.com
To contact the editor responsible for this story:
James Boxell at firstname.lastname@example.org