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AB Inbev calls on SABMiller shareholders to put squeeze on

It's not yet quite as heated as a row at closing time, but relations between ABInbev and SABMiller are turning sour.

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ABInbev CEO Carlos Brito has been in the UK on a charm offensive to win over SABMiller shareholders

Belgian brewing powerhouse Anheuser-Busch InBev is turning the screw on the board of its bid target SABMiller (LON:SAB).

The world's largest beer maker said SABMiller's reason for rebuffing ABInbev's indicative £42.15 a share bid “lacks credibility” and pointed out US cigarettes firm Altria, which owns 27% of SABMiller's shares, had already come out in support of the merger.

SABMiller's second largest shareholder, with 14% of the shares, BevCo (the investment vehicle of the Santo Domingo family), has not backed the ABInbev approach.

When reports of the merger first broke, it was suggested that the board of SABMiller would be amenable to becoming part of the Belgian group, but as is often the case in contested takeover battles, relations between the two companies look set to deteriorate rapidly.

On Wednesday, SABMiller knocked back ABInbev's third indicative offer – the first two were at £38 and £42 a share, respectively – saying the terms “very substantially” undervalue SABMiller, which counts Blue Moon, Carling Black Label, Coors, Miller Lite and Peroni among its brands.

ABInbev's chief executive, Carlos Brito, went over the head of the SABMiller directors and appealed directly to shareholders to apply pressure on SABMiller to come to the negotiating table.

He asked: “How long will it be before shareholders see a value of over £42 in the absence of an offer from AB InBev?

Shares in SABMiller currently trade at £36.30 and were at half that level at the beginning of the decade, so if previous performance is any guide to future performance – which it isn't – the answer to Brito's rhetorical question is: not long.

Broker Investec continues to recommend sitting on the sidelines, and asserts there is limited down side should ABI walk away.

“The robust nature of the SAB Board’s rejection of ABI’s public offer suggests the two parties are further apart on price than most (ourselves included) had anticipated. Uncertainty is also exacerbated by a lack of clarity on BevCo’s stance, as it currently has not given ABI its support. However, the door is open now for SAB minority shareholders to more freely engage with its board - we assume some shareholders may be wary of spurning a 44%+ cash premium in the currently challenging operating environment. Similarly, ABI is better placed to test the market as to the level at which SAB holders would support a deal,” the broker said.

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