AB InBev continues talks with lenders on jumbo acquisition loan

LONDON (Reuters) - Anheuser-Busch InBev is continuing talks with its relationship banks about a financing of up to $70 billion to back an improved all-cash proposed bid for SABMiller, after offering just over 68 billion pounds($104 billion)for its largest rival on Wednesday.

AB InBev said in a statement it would pay 42.15 pounds in cash per SABMiller share, having already made two prior offers at 38 and 40 pounds.

“AB InBev is talking to a wide group of banks and has been for a while. The company does not need a full underwriting yet,” a loan syndicate head said.

SABMiller’s board promptly and unanimously rejected AB InBev’s latest proposal, which it said very substantially undervalues SAB Miller.

As AB InBev has not yet made a formal offer, the proposed offer had no firm financing details. The brewing giant said however that it would be financing the transaction with internal resources and new debt.

“The cash consideration under the transaction would be financed through a combination of AB InBev’s internal financial resources and new third party debt,” according to a statement by AB InBev.

The company has until 5pm on October 14th to make a formal bid under Takeover Panel deadlines. Given the size of the financing and SABMiller’s UK listing, AB InBev will need to outline details to show certainty of funds when it makes a formal offer, several bankers said.

AB InBev has asked banks to underwrite up to $70 billion in debt financing, however this amount could be lower as its proposed offer also includes an alternative to the cash offer of partial payment in shares, limited to about 41 percent of SABMiller stock.

If AB InBev pays for 41 percent of SABMiller with this partial unlisted shares and cash offer alternative, SABMiller said this would imply an overall price tag of just 65 billion pounds, based on AB InBev’s closing share price on Tuesday.

AB InBev’s chief executive, Carlos Brito said on Wednesday that he remained confident that the company could put together financing for a bid.

An initial financing of up to $70 billion would be Europe’s biggest-ever corporate syndicated loan and would comprise bridge loans that would be refinanced with bond issues and longer-term loans.

Banks working on the deal include AB InBev’s core relationship banks including Banco Santander, Bank of America Merrill Lynch, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Deutsche Bank, ING, Mizuho Bank, Royal Bank of Scotland, Societe Generale and SMBC.

Editing by Christopher Mangham