Cheers set to end in a whimper

Picture: Reuters/Mike Hutchings

On Wednesday, Anheuser-Busch Inbev (AB InBev) will inform SABMiller’s South African shareholders what rand-sterling exchange rate was used to calculate the payout on their £45 purchase price.

The rate used will be the average of the trading range between September 20 and close of business on Tuesday.

During that period sterling slumped from around R18.50 to a near three-year low of R17.01 on Monday afternoon. In November 2015 one pound could buy R22.

The less-than-expected sale proceeds is the latest ignominy to be endured by South African interests in the largest ever transaction to hit our shores. A few months ago AB InBev announced no South Africans would be included in the merged entity’s top executive team. And last week it announced the merged company’s name would not contain any reference to SABMiller, but remain AB InBev.

This means SABMiller will no longer have a profile outside SA.

To those South Africans who see SABMiller as a national champion the sense of ignominy is all the greater because of the suspicion that AB InBev is little more than a beer-flavoured private equity company. In all of this they hear echoes of Edcon and Bain Capital.

Which is why in the months and years ahead AB InBev will be determined to prove just what a world-class leader it is.

For many of the beer companies acquired during SABMiller’s rise from dominant local player to the world’s number two the ignominy will have a familiar ring. In the tough takeover world it is how things play out between winner and loser.

No doubt AB InBev feels it paid more than enough to call the shots. In November 2015 the £74bn offer looked generous. For South African shareholders, around 14% of the SABMiller share register, it looked even more generous after December 10 — the ultimate hedge against reckless politicians.

But that all changed on June 23 when the results of the Brexit referendum were announced.

AB InBev was forced to nudge the price up to £75bn but sterling took such an unrelenting hammering that by Monday the higher price was only worth $92bn, compared with the $106bn value in November.

AB InBev did not benefit from the weakness in sterling because it had covered its exposure in November at $1.5267 to the pound. Effectively, AB InBev paid $13bn, an "overpayment" on top of major concessions to various regulators. In SA, it has to set up a development fund, and not reduce jobs for five years.