21 September 2011
RECOMMENDED PROPOSAL TO ACQUIRE FOSTER'S AT A$5.10 PER SHARE
SABMiller plc ("SABMiller") announces that it has agreed with Foster's Group Limited ("Foster's") a recommended cash offer to Foster's shareholders at A$5.10 per share (see endnote 1), which values Foster's equity at approximately A$9.9 billion.
As part of the transaction, and in line with Foster's previously announced capital management initiative, Foster's will pay its shareholders a return of capital of A$0.30 per share prior to closing, reflecting both the confirmed value of historic tax losses and a better cash/net debt position than assumed in SABMiller's initial proposal.
The agreed proposal represents an acquisition enterprise value of A$11.5 billion, which is a 2.8% increase on the enterprise value of A$11.2 billion implied by SABMiller's initial proposal announced on 21 June 2011 (see endnote 2).
The acquisition of Foster's is consistent with SABMiller's strategic priorities and will provide SABMiller with:
· exposure to Australia's strong economic growth prospects;
· a leading position in the stable and profitable Australian beer industry; and
· the opportunity to apply SABMiller's capabilities and scale to improve Foster's financial and operating performance.
The acquisition is expected to be EPS enhancing for SABMiller in the first full year of ownership and economic returns are expected to exceed the project WACC by year 5.
SABMiller and Foster's have agreed that the offer will be effected by means of a scheme of arrangement to be proposed by Foster's to its shareholders.
The scheme of arrangement is recommended by the Foster's board and is subject to a number of customary conditions, detailed in a scheme implementation deed, the principal terms of which are summarised in Attachment 1 to this announcement. A full copy of the scheme implementation deed will be available shortly on SABMiller's website at www.sabmiller.com.
The scheme implementation deed provides for the ordinary conduct of Foster's business from signing until completion, and arrangements for merger and implementation planning before closing. It specifies that in certain circumstances, including if a higher valued competing transaction is announced and completed within twelve months, Foster's will pay to SABMiller a break fee of A$99 million, being 1% of the equity value of the recommended transaction.
Foster's has commenced the process of obtaining a ruling from the Australian Tax Office ("ATO") confirming the tax treatment of the capital reduction.
SABMiller has internal resources and committed financing to fund the cash consideration, and SABMiller expects to maintain a strong investment grade credit profile.
As previously announced, SABMiller has separately reached agreement with Coca-Cola Amatil Limited to be able to acquire its share of the Pacific Beverages Pty Limited joint venture should SABMiller acquire a controlling interest in Foster's.
SABMiller has entered into a number of cash settled equity swap contracts that provide it with an economic exposure equivalent to 78 million shares (being approximately 4.0% of the total number of issued Foster's shares), which will reduce SABMiller's aggregate cash cost of the transaction consideration by approximately A$69 million.
SABMiller and Foster's have agreed to work together to prepare the necessary documents to be considered by Foster's shareholders. The scheme document is expected to be posted to Foster's shareholders in approximately six weeks. If approved by shareholders at the relevant scheme meetings later this year, SABMiller expects the acquisition to be completed before the end of 2011.
Unanimous Directors' Recommendation
The Directors of Foster's have unanimously recommended that shareholders vote in favour of the scheme of arrangement and capital reduction, and have committed to voting their own interests in favour of the proposals, in the absence of a higher valued competing proposal and subject to an independent expert confirming that the proposal is in the best interests of Foster's shareholders.
Commenting on the agreement, SABMiller's Chief Executive, Graham Mackay, said:
"We are pleased that we have reached agreement on a recommended transaction to be put to Foster's shareholders.
"Foster's will become an important part of our business, and through the application of our commercial capabilities and global scale, we expect to build on the initiatives that Foster's management has put in place, further enhancing Foster's performance and creating value for our shareholders.
"Foster's has a long-standing and proud reputation as one of the leading companies in Australia. We look forward to working with Foster's employees and other stakeholders to ensure the success of Foster's in the future as the largest brewer in Australia with an outstanding portfolio of brands."
References in this announcement to Foster's shares and to Foster's shareholders are references to fully paid shares. Different provisions consistent with their terms of issue will apply to partly-paid shares in Foster's. The number of partly paid shares is not material.
The acquisition enterprise value is calculated as follows:
· Equity value paid to Foster's shareholders - A$9,901m
· Plus: Estimated net debt at Dec-11 - A$1,377m
· Plus: A$0.30 per share capital return - A$582m
· Plus: Minority interests - A$12m
· Less: Estimated present value of historic tax losses - A$400m
· Acquisition enterprise value - A$11,472m
Webcast and conference call
A live audio webcast of a presentation to investors hosted by SABMiller's Chief Executive, Graham Mackay and Chief Financial Officer, Jamie Wilson will begin at 11:30 am London time / 8:30 pm Sydney time on 21 September 2011. To access the webcast or download a copy of the presentation, visit www.sabmiller.com.
A listen-only conference call of the live webcast is available on Tel: +44 20 3139 4830 - access code: 51453318#.
A conference call replay facility will be available one hour after the webcast on Tel: +44 20 3140 0698 - conference ID 379717#. A webcast replay will be available on www.sabmiller.com.
SABMiller Media Relations
Nigel Fairbrass / Beth Longcroft
Tel: +44 20 7659 0115 / Tel: +44 20 7659 0152
SABMiller Investor Relations
Gary Leibowitz / Henry Rudd
Tel: +44 20 7659 0119 / Tel: +44 20 7659 0159
Financial Dynamics - UK
John Waples: +44 7717 814 520
Jonathon Brill: +44 7836 622 683
Ross Thornton: +44 7738 198 946
Financial Dynamics - Australia
Jim Kelly: +61 412549083
Lauren Thompson: +61 438954729
SABMiller has retained J.P. Morgan, Moelis & Company, RBS and Morgan Stanley as financial advisers and Allen & Overy and Hogan Lovells International LLP as legal advisers.
SABMiller is one of the world's largest brewers with brewing interests and distribution agreements across six continents. The group's wide portfolio includes global brands such as Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine Draft and Grolsch, as well as leading local brands such as Aguila, Castle, Miller Lite, Snow and Tyskie. SABMiller is also one of the world's largest bottlers of Coca-Cola products.
In the year ended 31 March 2011, the group reported US$5,617 million adjusted EBITDA and group revenue of US$28,311 million. SABMiller is listed on the London and Johannesburg stock exchanges and has an American Depositary Receipt programme sponsored by the Bank of New York Mellon. (SABMiller's EBITDA is defined as EBITDA before cash flows from exceptional items but including dividends received from MillerCoors.)
Foster's is the leader in the Australian beer market with EBITDA of A$870 million, net sales revenue of A$2,275 million, PBT of A$697 million and gross assets of A$2,997 million in the year ended 30 June 2011.
The company has a portfolio of well established brands including VB, Carlton Draught, Corona, Crown Lager, Pure Blonde, Carlton Mid and Carlton Dry. Foster's is also the largest cider producer in Australia. Foster's is listed on the Australian Securities Exchange.
SUMMARY OF CONDITIONS OF SCHEME IMPLEMENTATION AGREEMENT
This is a summary only. The full terms will be available shortly at www.sabmiller.com.
1. conditions precedent
The scheme will not become effective and the capital return will not be implemented until each of the following conditions precedent (each a Condition Precedent) has been satisfied or, if applicable, waived in accordance with the scheme implementation deed:
(a) the court approves the scheme in accordance with section 411(4)(b) of the Corporations Act;
(b) Foster's shareholders approve the scheme in accordance with section 411(4)(a)(ii) of the Corporations Act at the scheme meeting;
(c) Foster's shareholders approve the capital return resolution at a special general meeting;
(d) the independent expert opines that the transaction is in the best interests of shareholders;
(e) before 8.00 am on the second court date:
(i) Foreign Investment Review Board approval is obtained;
(ii) the Australian Competition and Consumer Commission notifies that it has no objection to the Transaction;
(iii) Foster's receives a tax ruling under Division 358 of Schedule 1 of the Taxation Administration Act 1953 (Cth) in connection with the capital return (and to the extent that the ruling does not allow the entire amount of the capital return to be paid the scheme consideration will be increased by that amount and this Condition Precedent will be waived);
(iv) all other regulatory approvals have been obtained, or the relevant waiting periods have expired or been terminated;
(v) no restraint or prohibition by any regulatory authority is in place that would materially adversely impact or restrain completion of the transaction;
(f) no "prescribed occurrence" (as defined in the scheme implementation deed) has occurred or becomes known to SABMiller before 8.00 am on the second court date;
(g) each Foster's representation and warranty is true and correct at 8.00 am on the second court date;
(h) each SABMiller representation and warranty is true and correct at 8.00 am on the second court date; and
(i) before 8.00 am on the second court date no "material adverse change" (as defined in the scheme implementation deed) is announced or becomes known to SABMiller.
2. recommendations and intentions
2.1 Foster's board's recommendation and intentions
Subject to paragraph 2.2 below and the independent expert concluding that the transaction is in the best interests of shareholders, Foster's undertakes that:
(a) each Foster's director will recommend that shareholders vote in favour of the scheme and the capital return resolution; and
(b) the scheme booklet will include a statement by each Foster's director to that effect and to the effect that each Foster's director who holds or controls shares will vote all shares held or controlled by him or her in favour of the scheme and the capital return resolution at the special general meeting.
2.2 Change in Foster's director's recommendation
The Foster's board will use its best endeavours to procure that no Foster's director changes, withdraws or modifies or makes any statement inconsistent with his or her recommendation or statement under paragraph 2.1 above unless there is a superior proposal, or their fiduciary duties require it or the independent expert concludes that the transaction is not in the best interests of Foster's shareholders.
3. EXCLUSIVITY period AND DEAL PROTECTION RIGHTS
There are no shop, no talk, no due diligence and notification and matching rights typical for agreements of this type.
4. break fee
Foster's is liable to pay a break fee to SABMiller in the amount of $99 million (being approximately 1% of the scheme consideration) in a number of limited circumstances including, in summary, if:
(a) a third party acquires control of Foster's pursuant to a competing proposal;
(b) the Conditions Precedent in paragraphs 1.1(f) or 1.1(g) above are not satisfied and the scheme is not implemented;
(c) a director or directors of Foster's fail to make or change the recommendation in paragraph 2.1 above and the Conditions Precedent in paragraphs 1.1(a), 1.1(b) or 1.1(c) is not satisfied;
(d) the scheme implementation deed is terminated by SABMiller because of:
(i) a material breach by Foster's of the scheme implementation deed; or
(ii) the Foster's board failing to make or changing its recommendation and statements in accordance with paragraph 2 above; or
(e) Foster's wishing to exercise its right to terminate for the reason set out in paragraph 4(d)(ii) above.
The scheme implementation deed may be terminated by either party where the other party materially breaches a provision of the scheme implementation deed and the breach subsists for 5 business days, or the circumstances set out in paragraph 4(d)(ii) above occur.
If the scheme is not effective by 29 February 2012 or a Condition Precedent (except the Condition Precedent 1.1(e)(iii)) becomes incapable of being satisfied, then the parties will consult in good faith with a view to determining whether the transaction may proceed by way of alternative means or methods (except in respect of the Conditions Precedent in paragraphs 1.1(b) and 1.1(c) above). In the event that agreement is not reached within a certain consultation period, either party may, provided that the relevant Condition Precedent is for their benefit, terminate the scheme implementation deed.
6. other provisions
There are typical mechanical provisions in the scheme implementation deed setting out the parties' obligations to implement the transaction.