There are no hard definitions of the jargon used in takeover bids but “a very substantial undervaluation” should not require much interpretation. It surely means a lot more than a gap of 3.2%. SABMiller’s chairman, Jan du Plessis, would look ridiculous if, having used those words last week when rejecting a £42.15-a-share proposal from Anheuser-Busch InBev, he then rolled over and said yes to £43.50.
In practice, Du Plessis may feel his freedom to speak his mind is constrained by the views of his big shareholders. Altria, the Marlboro cigarette firm with a 27% holding, has already deserted to the bidder’s camp. If the Santo Domingo family from Colombia, with 14%, wants to accept the new terms (in share alternative form), then resistance becomes tricky to sustain, or so the unwritten rule for company chairmen says.
But directors are paid to give their opinions on a company’s worth and prospects, not to be an echo chamber. If Du Plessis meant what he said last week, he should reject £43.50 a share whatever his shareholders think. It would not be an outrageous stance. Ever since AB InBev made its move a month ago, £45 a share has always seemed the minimum price SAB should demand to open its books.
That’s for two reasons. First, AB InBev timed its move opportunistically. SAB’s shares were trading at close to £38 in March before investors started to fret about emerging markets. Those general worries apply to SAB in the short term, and possibly the medium term, but the company’s ability to sell more beer in, say, Africa over the next few decades is not altered one jot. SAB is almost the definition of a stock to hold and forget. Shareholders get to sell a company only once. At the very least, SAB should depart at a premium to comparable takeovers in the sector, which implies at least a couple more quid on the current offer.
The second reason to reject the latest offer is that SAB has a superb record and investors would be taking little risk in sticking with what they know. SAB is not a Cadbury Schweppes, struggling to defend its chequered returns when Kraft came calling in 2009. It is the world’s second-largest brewer and has only enriched its shareholders during its 15 years on the London market. It doesn’t need a saviour.
SAB’s board, having been told of AB InBev’s new offer yesterday morning, did not manage to respond by the time the market closed. That may suggest nervousness in the ranks. But du Plessis’ correct reply should be obvious given his past statements: £43.50 is still not enough. If he says something different, he’s lost his bottle or his command of the English language, or both.
Glencore’s debt plans remain in spotlight
Under normal circumstances, Ivan Glasenberg would surely wish to be buying, not selling, a couple of second-tier copper mines. After all, Glencore’s great trader told an FT conference the other day that the copper market is “distorted” and prices do not reflect the low level of stocks and the continued healthy demand from China.
These are not normal circumstances. Glencore is obliged to be in the debt-reduction game and would-be buyers of peripheral assets must be given a hearing. Thus the company has appointed investment bankers to check out the real level of interest in the Cobar mine in Australia and Lomas Bayas in Chile.
Analysts estimate the mini-collection might fetch up to $1bn. That barely moves the dial in the context of Glencore’s borrowings of $30bn, which is why the main plot still centres on the original plans for reducing borrowings. But these add-on copper negotiations still have significance. We know Glasenberg can over-pay for assets in good times – witness Xstrata in 2013. But can he persuade others to do the same in a different climate for the mining industry?
Tesco’s ‘brand guarantee’ looks set to disappoint
Every supermarket chain likes to claim its new price scheme is the best in the business. In Tesco’s case, however, its new “brand guarantee” isn’t even better than the version it replaces in one important respect. The new scheme covers only branded products whereas the old one, “price promise”, also included own-label goods and fresh food.
There is an important compensation, of course. Instead of being given a voucher to be redeemed against a future purchase, any money owed will be returned instantly at the till or online checkout. That’s a useful feature if you are the sort of person who loses, or can’t be bothered with, small pieces of paper (and, note, Tesco says half the old vouchers were never used).
But, for those Tesco shoppers who are organised and diligent users of vouchers, a narrower scheme that covers fewer goods is plainly inferior. Overall, one suspects this revamp will annoy as many customers as it pleases.
It is also odd that Tesco went to the high court last year to defend, successfully, its right to compare the price of its own-label goods against those of Sainsbury’s, which argued its own ingredients were better. What was that fuss all about?