SABMiller meets investors

09 October, 2015

SABMiller, the global brewer which is the subject of a takeover bid from Anheuser-Busch InBev, is meeting its investors today (October 9).

The company says the meeting is to discuss its recent trading statement and to provide an update on its operations.

The London-based global brewer which includes brands such as Peroni, Pilsner Urquell, Amarula, Savannah Gold, has announced that it has increased its target annual run rate cost savings from its cost and efficiency programme, announced in May 2014, from US$500 million by March 31, 2018 to at least $1,050m by March 31, 2020.

AB InBev has bid £42.15 per share in cash, with a partial share alternative for the brewer. It has stated its surprised that the SABMiller board claims the offer “still very substantially undervalues SABMiller”.

Thomas Buckley and Thomas Mulier of Bloomberg News comment: “SABMiller Plc doubled a pledge to cut costs as it seeks to rally shareholders around its rebuttal of Anheuser-Busch InBev NV, the larger rival seeking to buy the UK brewer for a record £65.2 billion ($100bn).

Annual savings in the 12 months through March 2016 should exceed $430m and reach $1.05bn by 2020.

The company had previously targeted about $500m in annual savings by 2018. The onus is on SAB to prove it’s worth more after saying AB InBev’s proposal “substantially undervalues” the brewer.

Under UK regulation rules, AB InBev has until Oct. 14 to make a formal offer for SABMiller. Altria Group Inc., SABMiller’s largest shareholder with a 27% stake, has urged the board to accept the proposal by AB InBev, which came out on Thursday criticising the target company for its refusal to engage, saying its resistance lacks credibility.

Trevor Stirling, an analyst at Sanford C.Bernstein, told Bloomberg News: “Clearly it makes a lot of sense as part of SABMiller’s bid defence. They’re saying they can drive out cost savings as well as AB InBev can to reassure shareholders that there’s no need to sell."

Bloomberg says the new cost savings will come mostly from procurement and also from making manufacturing and distribution more efficient, the company said. SABMiller said the plan assumes that there is no change of ownership. SAB rose as much as 0.3% to 3,653 pence in London.

AB InBev’s proposal of 4,215 pence a share in cash that most stockholders would receive is 44% above where SABMiller was trading before speculation of a deal.

“Our recent trading statement highlighted our accelerating growth in the second quarter,” said Chief Executive Officer Alan Clark. “Another key plank of our strategy is to build a globally integrated organisation to optimize resource, win in market and reduce costs.”

Clark said SABMiller has a 38% profit margin in its biggest 20 markets, based on earnings before interest, tax, depreciation and amortisation. Still, that is short of AB InBev’s profitability, the highest among major brewers. The Belgian brewer’s Ebitda margin for its total business was 39.4% last year. Including all of SABMiller’s markets, the brewer’s most recent full-year Ebitda margin was 25.4% on an adjusted basis, or 29.5% unadjusted, say the Bloomberg team

Keywords: beer, sabmiller, brewer

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