AB InBev faces deadline to formalise bid for SABMiller
THE world’s largest brewer wanted to keep the biggest deal of the year under wraps. Market chatter and the UK’s unique takeover rules got in the way.
The Takeover Panel forced SABMiller to release a statement about an approach from larger rivalAnheuser-Busch InBev (AB InBev) after speculation on Tuesday sent London-based SABMiller’s shares up as much as 4.1%, according to two people with knowledge of the matter, who asked not to be identified.
The disclosure triggers a 28-day timeline for a formal, fully financed bid. Known as the put-up-or-shut-up rule, if AB InBev decides to walk away from the transaction, it can’t come back for six months.
Stringent rules on disclosure require a company to confirm or deny any hint of a deal, whether that comes from an anonymously sourced news article or unusual stock movement. The Takeover Panel,the world’s oldest acquisition oversight body, introduced the rules in 2011, affecting deals by companies including Pfizer and Glencore.
"Media attention following disclosure of deal negotiations can be disruptive to the companies, and can kill an otherwise valuable deal," says John Coates, professor of law and economics at Harvard University. Of the $1-trillion in acquisitions of UK companies announced since September 2011, when the new rules came into effect, $166bn have been terminated or withdrawn.
Terminated deals last year included Pfizer’s rejected $125bn bid for AstraZeneca, and Carillion’s spurned attempts to merge with Balfour Beatty that would have created a company with a combined market value of more than £3bn at the time.
The UK’s rules are more stringent than in the US, where companies are not subject to disclosure requirements and can simply refuse to comment on speculation or stock moves. "Bidders are reluctant to start a process because of the rules," says Mr Coates.
That was not the case with AB InBev and its long-awaited pursuit of SABMiller.
AB InBev chairman Olivier Goudet contacted his counterpart at the smaller brewer, Jan du Plessis, this week to propose discussions on a potential deal, people familiar with the matter said on Wednesday.
No proposal had yet been received and there could be no certainty that an offer would be made, SABMiller said in a statement. ABI InBev now has until 5pm on October 14 to make an offer or announce it does not intend to proceed. SABMiller may also ask the panel for an extension. AB InBev had chosen to avoid expanding its circle of advisers beyondLazard to reduce the possibility of leaks, a person familiar with the situation said.
As it fronts queries from global financiers and advisers keen to get involved in what could be the deal of the year, the Belgian brewer will be keeping its eyes on the clock. The Takeover Panel will have one thumb firmly on the stopwatch.