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Jun 7, 2016

Bloomberg News - June 7, 2016: AB InBev Sweetens Offer to South African Union to Hrl SAB Deal, by Liezel Hill

Liezel Hill
Anheuser-Busch InBev NV proposed enhancing a South African employee-share program after a local union threatened to protest regulatory consent of its takeover of fellow brewer SABMiller Plc, as it seeks to clear the last hurdle for the deal’s approval there.

AB InBev will ensure participants of the plan receive the same premium offered to SABMiller shareholders by guaranteeing a minimum value for the so-called Zenzele shares in SABMiller’s South African unit when the program matures in 2020, based on the 44 pounds per share offered to SAB shareholders, AB InBev said in a statement Tuesday. The maker of Budweiser is also proposing an upfront cash payment, which would be paid soon after the takeover is completed and would be included in the guaranteed amount.
ABI said its latest offer would deliver the same premium being paid to SABMiller shareholders, along with an immediate cash benefit and “no downside risk due to the guaranteed minimum value.” But that’s not enough, according to Katishi Masemola, the general secretary of South Africa’s Food and Allied Workers Union. The employee-share program should be wound up immediately, not when it matures, and replaced with a new plan that’s more relevant to the enlarged company, he said.
“We are far from happy,’’ Masemola said. The union is prepared to take its case as far as South Africa’s Constitutional Court, the highest in the country.

Planned Appeal

The union said last week that it planned to appeal a recommendation by the country’s Competition Commission to approve AB InBev’s $106 billion purchase of SABMiller, which would create the world’s largest brewer. The takeover was cleared by South Africa’s Competition Commission after AB InBev agreed to sell SABMiller’s stake in wine and spirits maker Distell Group Ltd., protect jobs and support the local beer industry. It now goes to South Africa’s Competition Tribunal.
A key date in the process is Aug. 12, when London-based SABMiller is scheduled to pay its dividend. AB InBev will receive the payout if the deal is completed by then. The Leuven, Belgium-based maker of Stella Artois and Beck’s has been seeking regulatory approval around the world for the acquisition, and is poised to gain approval from the U.S. Justice Department, people familiar with the matter said last week.“The thing to remember is that they’ve pledged $3 billion to SABMiller if the deal falls through,” said Andrew Holland, an analyst at Societe Generale. “If the South African unions know this, it erodes ABI’s negotiating power.”
AB InBev shares rose 1.1 percent to 115.60 euros at 10:41 a.m. in Brussels.