Mega-Beer Merger Not a Slam Dunk as Vote Nears

LONDON — A vote on a merger between Anheuser-Busch InBev and SABMiller plc is expected to come on Sept. 28 as SABMiller shareholders meet to discuss the pending $100-billion-plus deal.

However, approval of the transaction is not a definite, according to industry watchers. As Seeking Alpha reported, large institutional shareholders such as BlackRock and State Street Global Advisers are expected to approve the deal because they also own interests in Anheuser-Busch and Molson Coors, but the hedge fund vote is harder to forecast. 

Some hedge funds, according to the report, "may gamble and skip out on voting by declining to convert their options and derivatives to save on the exercise tax," the report added.

In addition, SABMiller's two biggest shareholders, Altria Group Inc. and BEVCO, are being treated as a separate class of shareholders and are excluded from having a say in this vote.

A report in the Wall Street Journal echoed these concerns, stating some investors and bankers are warning a group of hedge funds that they could unintentionally jeopardize the deal.

SABMiller needs support from 75 percent of the shares voted to close the deal and only a small minority of shareholders plan to vote against the deal, which they believe undervalues the U.K.-based brewer. However, with Altria and BEVCO excluded from the vote, a relatively minor faction would be in a position to block the transaction, according to the news outlet.

Shareholders owning the remaining 60 percent of SABMiller will determine the outcome of the vote. If more than a fourth of them — 15 percent of overall SABMiller shares — vote against the transaction, this would be enough to kill the deal, according to an analysis by Stifel Nicolaus & Co.

If hedge funds choose to stay on the sidelines, only 40 percent of SABMiller shareholders would get to vote on the deal — meaning that only 10 percent of shareholders could effectively block the acquisition, according to WSJ.

Votes by proxy are due by Sept. 26. Votes can also be cast at SABMiller's general meeting on Sept. 28. SABMiller's board threw its support behind the deal in late July.

The two beer companies reached an agreement in November and have spent the past few months gaining regulatory approval in the various countries where they operate. In July, the U.S. Department of Justice (DOJ) gave its approval based on two contingencies: A-B's InBev's agreement to divest the brewing and sale of SABMiller beers such as Miller Lite and Miller Life in the United States, and A-B InBev must also seek DOJ review of any future acquisitions of beer distributors or craft beer brands, as CSNews Online previously reported.

Molson Coors will acquire A-B InBev's 58-percent stake in MillerCoors and will make and sell Miller Light and Coors Light in the United States. Molson Coors will also have the rights to the Miller brand outside the U.S.