Bloomberg News

SABMiller Said to Seek $10 Billion Debt for Foster’s Bid

June 21, 2011

(Updates with CFO comments in fourth and fifth paragraphs.)

June 21 (Bloomberg) -- SABMiller Plc, the world’s second- largest brewer by volume, plans to fund its bid for Foster’s Group Ltd. with about $10 billion of debt, according to two people with direct knowledge of the situation.

The maker of Peroni said today it will pursue Foster’s after Australia’s biggest beer company rejected its A$9.5 billion ($10 billion) cash offer. An acquisition of the Melbourne-based brewer would be SABMiller’s biggest, giving it about 50 percent of Australia’s beer market, including the top- selling Victoria Bitter.

SABMiller will use existing resources and new debt to pay for the deal, according to a statement today.

Chief Financial Officer Malcolm Wyman told investors in a conference call today the brewer won’t sacrifice its investment- grade rating to fund the takeover.

“It’s comfortable and leaves us with a credit rating which is an investment-grade,” Wyman said. Standard & Poor’s and Fitch Ratings rank SABMiller’s debt BBB+. Moody’s Investors Service rates it Baa1.

The deal will increase SABMiller’s debt to about three times earnings before interest, tax, depreciation and amortization, Wyman told investors. Absent the acquisition, the leverage ratio would be one time for the year ending March 2012.

The cost of insuring SABMiller’s senior bonds rose to the highest in two years, with credit-default swaps surging 18 basis points to 100.5, according to CMA.

Beth Longcroft, a SABMiller spokeswoman, declined to elaborate on the financing.

The London-based company said it hired JPMorgan Chase & Co., Moelis & Co., Royal Bank of Scotland Group Plc and Morgan Stanley as advisers for the takeover.

SABMiller signed a $2.5 billion five-year refinancing revolving credit facility in April, agreeing to pay an initial interest of 60 basis points more than the London interbank offered rate to draw the funds, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.

--with assistance from Michael Shanahan. Editors: Cecile Gutscher, Faris Khan

To contact the reporter on this story: Patricia Kuo in London at pkuo2@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net


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