The £68 billion battle for brewer SABMiller is going 'hostile lite'

The battle to create a $250 billion global brewing giant that controls a third of the world's beer is getting fierce.

AB InBev, the US-Belgian brewing giant behind beers like Budweiser and Corona, made a £68 billion bid for London-listed rival SABMiller on Wednesday, only to have the offer thrown back in its face.

The board of SABMiller, which makes beers like Peroni and Grolsch, said the bid "substantially undervalues" the company.

AB InBev has shot back on Thursday saying the rejection "lacks credibility." The company argues that the bid is more than fair, given it's a 44% above SABMiller's share price in mid-September when takeover talks were first made public.

AB InBev also points out that SAB's biggest shareholder Altira, which owns 27% of the company, supports the bid.

Now Carlos Brito, AB InBev's CEO, is calling on SAB's shareholders to rise up and put pressure on SAB to engage.

Here's Brito:

Notwithstanding our good faith efforts, the Board of SABMiller has refused to meaningfully engage with us. Our proposal creates significant value for everybody. How long will it be before shareholders see a value of over GBP 42 in the absence of an offer from AB InBev? If shareholders agree that we should be in proper discussions, they should voice their views and should not allow the Board of SABMiller to frustrate this process and let this opportunity slip away.

In a note on Thursday morning German investment bank Berenberg has characterised this approach as going "hostile lite," referencing SABMiller's Miller Lite beer.

Analysts Javier Gonzalez Lastra and Adam Mizrahi say:

In his US conference call, Mr Brito appealed to SABMiller's minority shareholders to voice their view to the board, which could be interpreted as a "hostile lite" approach (despite ABInBev having stressed its desire to gain the recommendation from the SABMiller board). If ABInBev does indeed have the support of both Altria and Bevco, which combined account for 41% of SABMiller's equity, it would appear natural that there is some probability that ABInBev eventually goes hostile.

The consensus in the City is that the deal will eventually get done. AB InBev desperately needs SABMiller for its growth potential, while SAB is facing increasing pressure from its own shareholders.

In a separate note on Thursday, RBC Capital Markets says it expects a final deal to be struck at £44 a share, compared to the current offer of £42.15. Not far to go.