Re SABMiller Plc

JurisdictionEngland & Wales
CourtChancery Division
JudgeMr. Justice Snowden
Judgment Date23 Aug 2016
Neutral Citation[2016] EWHC 2153 (Ch)
Docket NumberCase No: CR-2016-004895

[2016] EWHC 2153 (Ch)







Royal Courts of Justice

Rolls Building, Fetter Lane,

London EC4A 1NL


Mr. Justice Snowden

Case No: CR-2016-004895

In The Matter of Sabmiller Plc

Mr. Martin Moore QC and Mr. Stephen Horan (instructed by Linklaters LLP) for SABMiller plc

Mr. Dominic Chambers QC (instructed by Simmons & Simmons LLP) for Soroban Master Fund LP and Soroban Opportunities Master Fund LP

Mr. Michael Todd QC (instructed by Macfarlanes LLP) for Altria Group, Inc.

Mr. Andrew Thornton (instructed by Freshfields Bruckhaus Deringer LLP) for Anheuser-Busch InBev SA/NV

Hearing date: 22 August 2016

Judgment Approved

Mr. Justice Snowden



This is an application by claim form dated 17 August 2016 issued by SABMiller plc ("SABMiller") which seeks an order under section 896 of the Companies Act 2006 summoning a single meeting of all of the holders of the ordinary shares of US $0.10 each of SABMiller other than Altria Group Inc. ("Altria") and BEVCO Ltd. ("BEVCO") (or their nominees, if any), for the purpose of considering a scheme of arrangement (the "Scheme").


The object of the Scheme is to effect the acquisition of the entire issued, and to be issued, share capital of SABMiller by Newbelco SA/NV ("Newbelco"). The Scheme is the first stage in a complex process whereby, in commercial terms, Anheuser-Busch InBev SA/NV ("AB InBev") will acquire control of SABMiller. The transaction values the entire issued and to be issued share capital of SABMiller at £79 billion as at 12 August 2016, and involves a significant premium over the undisturbed share price.


The process comprises three stages as follows:

i) the Scheme, pursuant to which SABMiller shareholders will receive 100 shares (the "Initial Newbelco Shares") in Newbelco in respect of each of their SABMiller Shares;

ii) a Belgian law voluntary cash takeover offer by AB InBev for all of the Initial Newbelco Shares pursuant to which SABMiller shareholders who elect (or are deemed to elect) to do so will receive the cash consideration in return for their Initial Newbelco Shares and SABMiller shareholders who elect (or are deemed to elect) to receive the partial share alternative (the "Partial Share Alternative" or "PSA") will receive the cash element of the Partial Share Alternative and retain the relevant proportion of their Initial Newbelco Shares, which will be reclassified and consolidated into restricted shares having the rights set out in Newbelco's Articles of Association (the "Restricted Shares"); and

iii) the merger of AB InBev into Newbelco through a Belgian law merger by absorption of AB InBev pursuant to which AB InBev shareholders will become shareholders in Newbelco, and Newbelco will be the surviving entity and the new holding company of the combined group.


At the end of the process, the former members of SABMiller will in respect of each SABMiller Share either receive £45 in cash (the "Cash Consideration") or £ 4.6588 in cash and 0.483969 Restricted Shares under the PSA.


The transaction is unanimously recommended by the directors of SABMiller who have stated that they consider the terms of the Cash Consideration to be fair and reasonable, and that they recommend that SABMiller Shareholders vote in favour of the transaction. The SABMiller directors have not expressed an opinion on the PSA and instead have set out the advantages and disadvantages of electing for the PSA.


Altria is SABMiller's largest shareholder, with 26.48% of its ordinary share capital, and BEVCO is the second largest shareholder, with 13.85%. Each of Altria and BEVCO have an existing relationship agreement with SABMiller entitling them amongst other things to appoint directors of SABMiller. Altria also has an agreement relating to tax matters.


At the same time as the Scheme was announced in November 2015, Altria and BEVCO each gave certain irrevocable undertakings to AB InBev, subject to certain terms and exceptions, either (i) to vote in favour of resolutions to approve the transaction including the Scheme at any general or class meeting or court convened meeting to be held in connection with the Scheme; or (ii) if for the purposes of the Scheme court meeting they do not form part of a class with the general body of SABMiller Shareholders, to provide their written individual consent to the terms and implementation of the Scheme.


Altria and BEVCO have also irrevocably undertaken to elect for the Partial Share Alternative. Indeed, the evidence, as reflected in the draft letter from the Chairman of SABMiller to be included in the Explanatory Statement to be sent to shareholders, is that the terms of the PSA were structured principally for the benefit of Altria and BEVCO.


Particular reference is drawn in that regard to the terms of the Restricted Shares. Those shares, which will be held by those former SABMiller shareholders who elect (or are deemed to have elected) for the Partial Share Alternative, will rank equally with the ordinary shares in Newbelco as regards dividends and voting rights, but will be unlisted, not admitted to trading on any stock exchange and not capable of being deposited in an ADR programme. They will also be subject to restrictions on transfer until they are converted into ordinary shares, which can only occur with effect from the fifth anniversary of completion of the transaction.


The Restricted Shares also give their holders certain rights to purchase further ordinary shares in Newbelco and collectively to appoint up to three directors to the Newbelco Board. By virtue of the resultant holdings of Restricted Shares to be held by Altria and BEVCO, which are a function of their current large shareholdings in SABMiller, Altria will most likely be able to ensure that at least one candidate favoured by it becomes a director of Newbelco and it seems highly probable that at least two such candidates would become a director. BEVCO in contrast cannot be certain that any candidate favoured by it could become a director, but will probably be able to ensure that one such candidate becomes a director, particularly if, post-completion it exercises the top up rights to acquire more ordinary shares in Newbelco.


The value of the Partial Share Alternative is a matter of some debate, can fluctuate and on a "see-through" basis to the prevailing share price of AB InBev might be less or more than the value of the Cash Consideration. Furthermore, an illiquidity discount may also affect a shareholder's view of the value of the Restricted Shares. It is apparent, for these and other reasons, that all SABMiller shareholders will need to consider their individual circumstances very carefully and take professional advice before deciding whether to elect for the Partial Share Alternative rather than the Cash Consideration.


The transaction was announced on 11 November 2015 and was pre-conditional upon certain regulatory clearances, so that no steps toward convening any Scheme meeting could be taken in practice until those pre-conditions were satisfied. At the time of the announcement on 11 November 2015 the Cash Consideration was £44 and the PSA comprised £ 3.7788 and 0.483969 of a Restricted Share for each SABMiller Share. On a see-through basis (before any illiquidity discount) the PSA was valued at a 4.9% discount to the Cash Consideration.


Following the Brexit referendum there was a steep decline in the value of sterling against the currencies in which SABMiller conducts much of its business and against the Euro. This had two effects, namely:

i) the see through value of the PSA (prior to any illiquidity discount) stood at a premium (currently 13%) to the Cash Consideration; and

ii) the attractiveness of £44 declined against a fair value of the business of SAB Miller.


As the time for satisfaction of the pre-conditions approached and the recommendation of the board of SABMiller became imminent, certain SABMiller shareholders or persons interested in SABMiller Shares contacted SABMiller in relation, amongst other matters, to class composition. The majority of those communications received by SABMiller expressed the view that Altria and BEVCO should not vote in the same class as the other shareholders.


On 26 July 2016 AB InBev announced a revised and final offer so that the Cash Consideration comprised £45 and the PSA comprised £ 4.6588 and 0.483969 of a Restricted Share for each SABMiller Share. This offer, having been expressed as final, cannot now be revised without the consent of the Takeover Panel.


Since that date, certain SABMiller shareholders or persons interested in SABMiller Shares have contacted SABMiller in relation, amongst other matters, to class composition. These written communications received by SABMiller which specifically referred to the constitution of classes expressed the view that all shareholders including Altria and BEVCO should vote together as a single class.


On 29 July 2016, SABMiller announced its intention to recommend the Cash Consideration (staying silent as to the PSA). SABMiller also announced that it had concluded that it would be appropriate to propose to the Court that Altria and BEVCO be treated as a separate class of shareholders and therefore to allow other SAB Miller shareholders (the "Public Shareholders") to vote on the revised offer separately. The announcement said,

"We are cognisant that the PSA initially stood at a discount to the Cash Consideration, but recent events have resulted in it now standing at a headline premium, before any illiquidity discount. Amongst other reasons, that is why we intend to ask the UK Court to treat Altria and BEVCO as a separate class of shareholders."


The operative terms of the draft Scheme document...

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