Does Elliott Intervention Mean Higher SABMiller Takeover Tab?

The activist investor, which has a history of M&A intervention in Europe, builds a stake in the AB InBev target.
By Renee Cordes ,

U.S. activist fund Elliott Capital Advisors has snapped up a 1.3% stake in SABMiller, adding to expectations of further pressure on Budweiser maker Anheuser-Busch InBev (BUD) - Get Report to raise the tab on its takeover offer.

A regulatory filing posted on SABMiller's website Tuesday, July 12, shows that the U.K. arm of U.S. hedge fund Elliott Management  has acquired a 1.3008% holding in the London-based brewer of Miller Genuine Draft through the purchase of derivatives.

In a separate document posted on the same day, Elliott disclosed a 0.0373% short position in AB InBev, indicating a bet on a fall in the brewer's shares.

AB InBev shares did indeed lose some froth on Wednesday, falling 0.7% to €115.10 ($127.50) on the Euronext Brussels exchange in early afternoon trading for a market value of around €184.8 billion. The stock has a one-year return of 3.3%.

In London, SABMiller shares was recently up only marginally at 4,409.50 pence, paring earlier gains after rising to 4,442.50 pence. It has a market capitalization of around £71.6 billion ($95.07 billion), and the stock is up more than 30% over a year ago.

A spokesman for SABMiller declined to comment, as did Elliott.

Though the reasons for Elliott's latest move is unclear, it could be seeking a higher SABMiller offer price from AB InBev, which is based in Leuven, Belgium, and run out of New York City by CEO Carlos Brito.

The £71 billion offer was worth $108 billion in November when it was agreed but is now worth around $94 billion, largely as a result of the immediate post-U.K. referendum drop in the pound that now appears to be stabilizing.

AB InBev and SABMiller are the world's No. 1 and No. 2 brewers, respectively. The combined entity would sell one out of three beers on earth and hold about half the global beer profit pool.

Elliott Management, founded by billionaire Paul Singer, has a reputation for successfully running M&A interference in Europe, including in Germany, where it has frequently muscled in on contentious deals to either squeeze out more money as a minority shareholder or seek compensation in subsequent lawsuits.

In 2013 Elliott prevented San Francisco drug distributor McKesson (MCK) - Get Report from buying and delisting German peer Celesio. McKesson in 2015 was able to buy a majority of Celesio but only after reaching an agreement with Elliott. Celesio's website shows that McKesson currently owns 76.06% of Celesio with the rest of the shares in free float.

Elliott also took legal action against what it considered Vodafone's  (VOD) - Get Report lowball €7.7 billion purchase of German cable provider Kabel Deutschland in 2013.

More recently in the U.K. Elliott's last-minute swoop on Wembley Stadium owner Quintain Estates & Development in 2015 prompted Lone Star Funds to sweeten its offer for the London property development company.

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