The biggest Wall Street payday in years faces a ticking clock
A bid for SABMiller by Anheuser-Busch InBev could be one of the top six corporate takeovers in history.
The deal would create a merged group with a value of around $275 billion, and serve as a fee bonanza for the bankers providing advice and financing for the bid.
But AB InBev is in a race against time, thanks to rules governing deals in the UK, where SABMiller's shares trade.
The clock started ticking today, when SABMiller was forced to disclose AB InBev's interest by the UK Takeover Panel, which polices mergers and acquisitions in the UK. That came after a spike in SAB Miller's share price.
The statement said:
"The Board of SABMiller notes the recent press speculation and confirms that Anheuser-Busch InBev SA/NV ("ABInBev") has informed SABMiller that it intends to make a proposal to acquire SABMiller. No proposal has yet been received and the Board of SABMiller has no further details about the terms of any such proposal."
That announcement triggered something called Put Up or Shut Up, or PUSU, which gives a potential bidder 28 days to either make a firm and fully financed bid or make clear that it doesn't plan to. That runs out October 14. If AB InBev walks away it will not be able to return with a bid for six months.
A New York-based deal lawyer told Business Insider: "It's called the anti-siege rule - that a target can't be under siege indefinitely. If you can't come up with a firm offer then the company should be free to go about its business without distraction ... US practice could not be more different."
AB InBev has said it plans to work with SABMiller's board towards a recommended transaction. That means the maker of Budweiser is racing against time to either secure an agreement with SABMiller, or at the very least be a position where SABMiller can ask for an extension to the deadline.
And this isn't just any ordinary deal. The two companies combined would account for 58% of global beer industry profits, according to research from Bank of America Merrill Lynch, and that is likely to mean anti-trust regulators will take a long hard look at the transaction.
The deal lawyer said: "The bidder has a lot to do at this point. The fact is that when they make the approach they tend to assume it is either going to be announced or leaked, they would have been cognizant about that and I assume they would have done the necessarily homework to move forward."
It's not yet clear how willing SABMiller is going to be to reach a deal. Last year SABMiller made an approach to Heineken that Bloomberg reported was an effort to stymie AB InBev's advances.
AB InBev and SAB don't have to agree on everything within 28 days, but the buyer's decision to make this a "friendly" deal does make getting some accord on the broad outlines important. In the past, buyers like Pfizer have chosen to walk away because of the takeover rules.
There's a lot at stake for the investment bankers working on the deal. Fees could be as high as $235 million, based on a deal worth around $100 billion, according to Freeman & Co. There's even more to come for the banks that wind up financing the deal.
PUSU was introduced by the UK's Takeover Panel in 2011, in part as a reaction to an earlier bid for a UK-listed company by a US giant. That time it was Kraft bidding for Cadbury's, a deal that led to complaints in the UK that the country's biggest companies were easy takeover targets.
There is some wiggle room if AB InBev can't get a deal together in time and is asked to walk away for 6 months. It could be invited back to the table by SAB Miller or it could come back with an offer that's sure to be accepted.
Neither of those would be as ideal as a deal reached in just 28 days, especially for the companies' bankers.