South Africa: AB InBev proposes enhancing employee-share program amid local union’s plans to contest approval of its takeover of SABMiller

Anheuser-Busch InBev NV has proposed enhancing a South African employee-share program amid local union plans to contest the approval of its takeover of SABMiller Plc, as the brewer seeks to clear the last hurdle for regulatory consent in the country, Bloomberg reported on June 7.

AB InBev will ensure participants of the plan receive the same premium offered to SABMiller shareholders by guaranteeing a minimum value for the so-called Zenzele shares in SABMiller’s South African unit when the program matures in 2020, based on the 44 pounds per share offered to SAB shareholders, AB InBev said on June 7. The maker of Budweiser is also proposing an upfront cash payment, which would be paid soon after the takeover is completed and would be included in the guaranteed amount.

AB InBev said its offer would deliver the same premium being paid to SABMiller shareholders, along with an immediate cash benefit and “no downside risk due to the guaranteed minimum value.” But that’s not enough, according to Katishi Masemola, the general secretary of South Africa’s Food and Allied Workers Union. The employee-share program should be wound up immediately, not when it matures, and replaced with a new plan that’s more relevant to the enlarged company, he said.

“We are far from happy,’’ Masemola said. The FAWU is prepared to take its case as far as South Africa’s Constitutional Court, the highest in the country.

The union said last week that it planned to appeal a recommendation by the country’s Competition Commission to approve AB InBev’s $106 billion purchase of SABMiller, arguing that its demands regarding the Zenzele program be considered. The proposal to create the world’s biggest brewer was cleared by the antitrust regulator after AB InBev agreed to sell SABMiller’s stake in wine and spirits maker Distell Group Ltd., protect jobs and support the local beer industry. It now goes to South Africa’s Competition Tribunal, which will start a three-day hearing on June 22.

“Some parties have indicated they may intervene in this matter, but it will only be clear which parties are intervening by June 15, when they make their submissions,” the Tribunal said by e-mail.

A key date in the process is Aug. 12, when London-based SABMiller is scheduled to pay its dividend. AB InBev will receive the payout if the deal is completed by then. The Leuven, Belgium-based maker of Stella Artois and Beck’s has been seeking regulatory approval around the world for the acquisition, and is poised to gain approval from the U.S. Justice Department, people familiar with the matter said last week.

“The thing to remember is that they’ve pledged $3 billion to SABMiller if the deal falls through,” said Andrew Holland, an analyst at Societe Generale. “If the South African unions know this, it erodes ABI’s negotiating power.”

07 June, 2016