WHAT IT MEANS: SABMiller’s London move a boon for South Africans. Brewer’s African assets were the main prize for AB Inbev.
In March 1999 SA Breweries ended its first day of trading on the London Stock Exchange at 447p, giving it a market cap of £3.26bn.
Last Thursday, SABMiller ended its life as a listed entity at a closing price of £44.95. At this price, just 5p short of the AB InBev offer price, SABMiller’s market cap was an eye-watering £72.4bn.
By any standards it is an amazing achievement for a management team that back in 1999 was well known in SA but little heard of in the powerful investment capitals of the world.
For South Africans, even those not inclined to jingoism, it is a welcome reminder that we are capable of being world-class players.
More important is that, unlike the other four transferees — Old Mutual, Anglo American, Gencor-Billiton and Didata — SABMiller’s relocation has been a sustained benefit for South Africans. No money was wasted chasing ill-considered international acquisitions and the local operations were maintained at their world-class standards.
The company grew from a dominant regional player to the second-largest beer group in the world, pumping out profits and dividends all along the way.
Remarkably, while achieving this global strength, back on its home base the near-monopoly beer supplier edged up its market share from about 88% (excluding Heineken-owned Amstel) in 1999 to just over 90% in 2016.
Back in 1999 it was inevitable that most shareholders laying claim to the £3.26bn market cap were South Africans. Over the years, as acquisitions were largely funded by equity (now priced in an international currency), the proportion of South Africans on the shareholder register dropped steadily. The end-August register revealed 13.8% South Africans, which suggests South Africans had claim to a huge £10bn of the AB InBev payout, representing a threefold increase on the value South Africans owned in 1999.
In local currency terms the performance was boosted by the rand’s steady (until Brexit) decline against sterling over the 17 years. In 1999 the rand was about 11 to the pound; last week it was 18. So the rand value of the SA share of SABMiller increased from R35.9bn in 1999, when it listed in London, to R180bn last week, when it delisted from London and Johannesburg.
But as if to highlight just how whimsical all this empire-building can be, within two weeks of completing the AB InBev acquisition, SABMiller (or rather the beer business formerly known as SABMiller) will have been trimmed back to little more than the dominant regional player it was in 1999.
It will still have substantial operations outside Africa, in Latin America and Australia, but gone will be the Chinese, North American and a chunk of the European assets that had bulked it up to become the world’s number two player.
AB InBev CEO Carlos Brito has not spent the past 10 months merely sorting out the concerns of various global regulators — he and his large team of expensive advisers have finalised the sale of most of the assets accumulated during SABMiller’s London listing. Throughout this sale process Brito often seemed less concerned about the price than the speed of the sale.
SABMiller’s 49% stake in CR Snow, which owns the largest-selling beer brand in the world, will be sold to its Chinese partner, China Resources Enterprise, which holds the remaining 51%. The sale was done at a staggeringly low US$1.6bn, well below the $3bn-$5bn many analysts had tipped it to be.
The sale of SABMiller’s stake in the North American MillerCoors joint venture to Molson Coors at a more acceptable $12bn was announced within days of the formal release of the terms of the largest corporate acquisition seen in SA.
Not long after came news of the sale of key European brands Peroni, Grolsch and Meantime to Japan’s Asahi Group for €2.55bn.
These three major disposals, which are set to be finalised by October 11, will cut SABMiller’s annual beer sales of 250m hectolitres by almost 50%.
Also on the chopping block, and expected to go within a few months, are all of SABMiller’s Central and Eastern European beer brands, including Pilsner Urquell, Dreher, Tyskie and Ursus. With no obvious industry buyer, analysts have speculated that private equity funds might be prepared to pay the €5bn-€7bn the assets are thought to be worth.
That Brito was quick to agree to sales and offered up the Central and European brands even before he was asked to by EU regulators has confirmed for most that it was primarily SABMiller’s African assets that attracted him. (The Latin American and, to a lesser extent, the Australian businesses were a useful bonus.)
It was those very African assets that former SABMiller CEO Graham Mackay was determined to bulk up to ensure his company played a key role in the prolonged consolidation of the global beer market.
This determination made a London listing inevitable and also delayed the inevitability of last week’s delisting from London and Johannesburg.