E-Malt.com News article: South Africa: South African shareholders of SABMiller to fight for continued Johannesburg stock market listing

South African shareholders of SABMiller are prepared to fight for a continued Johannesburg stock market listing if the brewer gets taken over by Anheuser-Busch InBev so they can benefit from the future growth of a new global drinks giant, Reuters Africa reported on October 1.

AB InBev, the world's largest brewer, said last month it had approached SABMiller, the number two, about a takeover that would create a group with a market value of around $275 billion.

Whether or not the merged entity will stay listed on the Johannesburg Stock Exchange, as SABMiller is now, will be a key consideration for South African-based funds required to limit their exposure to international stocks.

SABMiller, with a market capitalisation of 1.3 trillion rand ($94.20 billion), is the largest company on the Johannesburg Stock Exchange, accounting for 12 percent of its value. The company employs more than 24,000 people in Africa.

Its departure would be a major blow to the exchange, which has been hurt by a global commodities rout.

The chief executive of Public Investment Corp (PIC), a state-owned South African pension fund and SABMiller's fourth-largest shareholder, said on October 1 that SABMiller must remain listed on the Johannesburg exchange after any takeover.

"SAB is a very important company in the South African economy and it is very significant to the JSE. It must remain on the JSE," Dan Matjila told Reuters.

AB InBev's intentions are unclear, given it has not yet made public any offer for SABMiller, which analysts expect could range from about $103 billion to $111 billion. It has until Oct. 14 to make a firm offer.

South African investors own about 10 percent of the company which started out as South African Breweries selling Castle Lager in the dusty gold-prospecting fields around Johannesburg in 1895. The largest three are PIC, Allan Gray Proprietary Ltd, another pension fund, and the SABMiller Employees Benefit Trust, which together own about 5 percent.

A source familiar with PIC's thinking said it was likely that it, and other shareholders, would fight for a JSE listing in a cash-and-share deal.

"There's huge growth potential for beer in Africa and it wants to maintain that exposure," the source said.

South African pension funds are required to invest 75 percent of their assets in domestic South African assets.

The South African shareholder base is not big enough to block any deal, but Jean Pierre Verster, a portfolio manager at Johannesburg-based 36One Asset Management, said it was still a "significant constituency to engage with".

"I see resistance if AB InBev suggests a mechanisation where it is cash only for South African shareholders," said Verster, whose firm owns a small stake in SABMiller.

Allan Gray's chief investment officer Ian Liddle told Reuters he would also like to see any new shares listed on the JSE so his firm's "pension fund clients would retain the ability to have exposure to the beverage industry, which we think offers very attractive economics for shareholders over the long term."

Beer industry analysts and bankers say South Africans should prepare to wave goodbye. They call the listing unnecessary, and note that scrapping it would force many South African shareholders to accept cash rather than shares, which is exactly what AB InBev's controlling owners are seen as wanting, to avoid dilution of their stake.

"If you do a cash or stock alternative, you want these guys to take cash and if you're not listing it in the UK or South Africa, they are more likely to take cash," said an industry banker not involved in the deal. "The unemotional way to think about it is that if Altria and Santo Domingo are going to deliver your deal, then you don't need to worry about the UK or South African shareholders."

Marlboro maker Altria Group and the Santo Domingo family of Colombia are SABMiller's largest shareholders, controlling about 40 percent of the stock. They are seen as preferring stock over cash which would trigger capital gains taxes. The challenge is offering all shareholders the same deal, but having as much of the general shareholder base as possible accept cash rather than stock.

Officials for AB InBev and SABMiller declined to comment.

AB InBev, maker of Budweiser, Stella Artois and other beers, dominates beer markets in Latin America but is largely absent from Africa, where a fast-growing middle class is drinking more beer.

The continent is expected to see a jump in the legal drinking age population by 2018, while in Western Europe and North America, the cumulative decline in beer volumes since 1998 has ranged from 5 to 10 percent, according to Rabobank Research.

Johannesburg trading volume may be light, but for a giant company making nearly one out of every three beers drunk worldwide, maintaining the listing may be a relatively cheap way to show goodwill as AB InBev seeks to gain access in a region beset by political and operational sensitivities, said Societe Generale analyst Andrew Holland.

"It's a way of providing a sop to South African shareholders," Holland said, recalling as an example how Nestle added a Tokyo listing for its shares after pushing into Japan. Nestle has since delisted is shares from Tokyo and a range of other cities, seeking to concentrate trading in Zurich.

But AB InBev is renowned for operational efficiency and another banker said there is scant practical benefit in keeping it.

"In the old days, 20 or 30 years ago, everyone wanted listings everywhere, but today most investors can trade on any main regulated stock exchange," the banker said.

Leuven, Belgium-based AB InBev's primary listing is in Brussels, but it has a secondary listing in New York, following InBev's takeover of U.S.-based Anheuser-Busch in 2008. Keeping SAB's listings in London and Johannesburg would make four.


02 October, 2015