Johannesburg - SABMiller shares dropped 2.03 percent on the JSE yesterday to close at R799.50 as reports emerged that the board had asked employees to stop working on integration with Anheuser-Busch (AB) InBev – a move that suddenly raised questions about the merger.
The two brewers yesterday declined to comment.
SABMiller chief executive Alan Clark ordered employees this week to halt the integration work. “There should be no contact with AB InBev with immediate effect, and all meetings and calls will be postponed until further notice,” said Clarke.
However, Bright Khumalo, Portfolio Manager at Vestact Asset Management, said it was premature to say the decision to “pause” work put the deal in disarray. “SABMiller wants the integration work to stop. That does not mean the deal is in disarray,” said Khumalo.
SABMiller’s stance is expected to worry bond investors who fought to get a piece of the largest corporate bond offering in history, with concerns that the yields they were being promised could be short-lived.
Debt sold by AB InBev to fund its takeover of SABMiller tumbled after the decision became public, sparking concerns the company could redeem more than $35 billion (497bn) of the $60bn in securities sold at a discount to where they had been trading.
Doubts over the takeover could not come at a worse time for bond investors starved of opportunities to earn interest.
When AB InBev sold the US portion of its bonds, the company received a record $110bn in investor orders.
The company’s debt had been rising steadily since January, with one portion trading as high as 109.8c on the dollar this month. Now the bonds are falling closer to 101c, because that was the price at which bondholders would have to sell their debt back to AB InBev if the deal fell apart.
“People get excited – they get attracted to the yield and they assume an announced deal is a done deal,” said Joe Mayo, the head of credit research at Conning. He said he did not buy bonds that back pending acquisitions above their redemption price.
“If the deal winds up not going through it obviously changes things for bondholders. Both companies are worse off if it doesn’t go through,” said Jack Flaherty, a money manager at GAM Holdings.
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