By Saabira Chaudhuri
LONDON -- SABMiller PLC has paused its integration work with Anheuser-Busch InBev NV, as the London-based brewer's board consults with shareholders over whether the revised offer AB InBev broached on Tuesday is acceptable.
The pause in integration doesn't necessarily signal that the SABMiller board will oppose the new offer. Still, news of the halt worried investors, sending AB InBev's American depositary receipts down 3.7% in New York.
In the spring, SABMiller had begun working with AB InBev on integrating finance, technology, procurement and certain supply-chain functions. The company on Tuesday decided to halt this work after AB InBev surprised SABMiller by revising its offer without consulting with the No. 2 brewer on the new terms, and said the revised offer was final.
SABMiller's board is now consulting with its largest shareholders to assess whether they like the new offer and plans to meet to consider the revised bid before making a final recommendation on whether shareholders should accept the latest deal. The board will consider a range of factors, including how the pound's weakness has eroded the all-cash portion of the deal's premium and what SABMiller's valuation would be if the bid from the world's largest brewer falls through, a person familiar with the matter said.
A recommendation by SABMiller's board could come within days, the person said.
"There should be no contact with AB InBev with immediate effect, and all meetings and calls will be postponed until further notice," said SABMiller Chief Executive Alan Clark in a memo to employees. "This also applies to contact with Asahi, Molson Coors and all advisers and consultants working on these transactions."
AB InBev had agreed to sell SABMiller's Peroni and Grolsch brands to Asahi Group Holdings Ltd. and the London-based brewer's U.S. business to Molson Coors Brewing Co. in pre-emptive moves to win antitrust approval.
Molson Coors's shares lost more than 5% Wednesday.
"Stopping work on the integration is not the same as rejecting the deal, although it clearly raises that possibility," said RBC analyst James Edwardes Jones, adding that the latest development "has introduced a significant level of uncertainty."
Belgian-based AB InBev boosted its cash offer to GBP45 ($59.12) a share from GBP44 a share to appease SABMiller shareholders, who had watched the value of the offer fall along with sterling. The pound sank after the June 23 vote by Britain to leave the European Union.
That sterling decline has deflated the value of AB InBev's cash-only offer, intended for most shareholders, compared with a separate cash-and-share offer aimed at SABMiller's two biggest shareholders, U.S. cigarette maker Altria Group Inc. and Colombia's Santo Domingo family. Altria said Wednesday that it expected to get another $500 million from its 27% stake in SABMiller as a result of the revised offer.
Aberdeen Asset Management, a large SABMiller shareholder, on Tuesday characterized AB InBev's revised offer as "unacceptable" following the drop in the pound, saying the deal unfairly favors investors who can opt for the cash and stock offer.
But other SABMiller shareholders, such as New York-based investment-management firm Twin Capital Management LLC, said they want to the deal to go through. "I think people are being too shortsighted," said Twin Capital Chief Executive David Simon in an interview on Wednesday. Mr. Simon, who said his firm owns more than a million shares of SABMiller, characterized AB InBev's offer as "fair."
Another large SABMiller shareholder, South Africa's Public InvestmentCorp. -- Africa's largest pension-fund manager -- in an emailed statement said it is "still in discussions with SABMiller on the offer price." It declined to make its view public at this point.
--Eyk Henning contributed to this article.
Write to Saabira Chaudhuri at firstname.lastname@example.org