Philip Morris Companies Inc. Announces Agreement to Merge Miller Brewing Company Into South African Breweries plc |
SABMiller plc to Become World's Second-Largest Brewer
Philip Morris Companies Inc. to Hold 36% of SABMiller plc
And to Accelerate Share Repurchase Program
NEW YORK, May 30, 2002 (BUSINESS WIRE) --Philip Morris Companies Inc. (NYSE:MO) announced an agreement with South African
Breweries plc (LSE:SAB) to merge Miller Brewing Company into South African
Breweries plc to form the world's second-largest brewer, with pro forma revenues
of $9.3 billion for the fiscal year ended March 31, 2002.
The transaction, with an implied value of approximately $5.6 billion, including
$3.6 billion in stock and $2.0 billion in Miller Brewing Company debt, is
expected to close in July, subject to customary regulatory review and South
African Breweries plc shareholder approval. Upon closing, South African
Breweries plc will change its name to SABMiller plc (SABMiller).
The assumption of Miller Brewing Company's debt will result in cash flow of
approximately $1.7 billion for Philip Morris Companies Inc. (Philip Morris),
which will be used to accelerate its share repurchase program in 2002.
SABMiller, which would have generated pro forma earnings before interest, taxes
and amortization (EBITA) of $1.2 billion on pro forma beer sales volume of 120
million hectoliters (102 million barrels) for the year ended March 31, 2002,
will continue to be headquartered in London. Graham Mackay, current chief
executive of South African Breweries plc, will lead the enlarged group as chief
executive. John D. Bowlin, current president and chief executive officer of
Miller Brewing Company, will be responsible for SABMiller's businesses in the
Americas and will report to Mr. Mackay.
Louis C. Camilleri, president and chief executive officer of Philip Morris,
said: "We are delighted with today's announced transaction, which is
strategically compelling and is in the best interest of our shareholders.
SABMiller will immediately become the world's second-largest brewer, with
arguably the best geographic footprint among all global brewers. The enlarged
group will have the ambition, as well as the financial and managerial
capability, to become the world's leading brewer."
Graham Mackay, chief executive of South African Breweries plc, said: "The
transaction represents a new chapter in our development, taking SABMiller to the
number two position globally, and positioning it to be a major participant in
the on-going consolidation of the global beer industry. The transaction will
provide access for South African Breweries plc and its shareholders to a
significant position in the U.S. market, which enjoys the brewing industry's
largest profit pool. Furthermore, it will enhance South African Breweries plc's
international brand portfolio."
John D. Bowlin, president and chief executive officer of Miller Brewing Company,
added: "Everyone wins through this dynamic combination, including Miller's
employees, customers and distributors. We are combining two great brewers with
distinct, yet complementary assets and talents, with the promise to become
greater than the sum of its parts. Miller Brewing Company is a great American
brewer that will now become part of an exciting, global brewing enterprise with
significant growth opportunities around the world."
Highlights of the Merger
Philip Morris will receive 430,000,000 shares in SABMiller, representing a 36%
economic interest in the enlarged group prior to an intended equity placing by
SABMiller. Philip Morris' total voting interest will be 24.99% of the votes
exercisable at a general meeting.
The implied value of the transaction is approximately $5.6 billion, based on a
closing price of 5.76 British pounds per share for South African Breweries plc
on May 29, 2002 and an exchange rate of 1.462 U.S. dollars per British pound,
and the assumption of Miller Brewing Company's debt of $2.0 billion.
It is the intention of Philip Morris to be a long-term shareholder in SABMiller.
Accordingly, Philip Morris has agreed not to dispose of any shares until June
30, 2005 and not to purchase any further interest until December 31, 2004,
subject to certain exceptions. At closing, Philip Morris will have three seats
on the SABMiller Board of Directors.
Growth Prospects for SABMiller
At closing, SABMiller will be the world's second-largest brewer with leading
positions in Central and Eastern Europe, North America, Central America, China
and Africa, and will be well positioned for growth in the global beer industry.
In addition, SABMiller will benefit from the combination of global scale, a
strong management team, a diverse and balanced earnings base, a broad portfolio
of leading brands and a powerful distribution infrastructure. These advantages
will position SABMiller at the forefront of the consolidating brewing industry.
The merger provides SABMiller with a significant position in the largest and
most profitable beer market in the world -- the United States -- and the company
will be well positioned in the three key growth segments in the United States
beer market -- light beers, imports and flavored malt beverages.
Impact on Philip Morris
For Philip Morris, the combination of the transaction and the accelerated share
repurchase program is expected to be essentially neutral to underlying diluted
earnings per share in 2002 and 2003, and marginally accretive in subsequent
years. The company said that it is maintaining its previously announced
projection for growth in underlying diluted earnings per share in the range of
9% to 11% for the full-year 2002.
In addition, based on current estimated share prices, the merger will result in
a one-time gain of approximately $3.0 billion pre-tax and approximately $2.0
billion after-tax, which is expected to be recognized in Philip Morris' 2002
third-quarter reported results.
Philip Morris Conference Call
A conference call for members of the investment community and news media with
Louis C. Camilleri, president and chief executive officer of Philip Morris, is
scheduled for 8:00 a.m. eastern time on May 30, 2002. Live audio from the
conference call will be webcast at www.philipmorris.com.
South African Breweries plc
South African Breweries plc is one of the world's major beer and beverage
companies. It is the fourth largest brewer in the world by volume, with brewing
operations in 23 countries and total sales volume in the year ended March 31,
2002, of 70.4 million hectoliters (60 million barrels) of beer. It also is one
of the world's largest bottlers and distributors of Coca-Cola(TM) products
outside the United States, with total annualized sales volume in the year ended
March 31, 2002, of 17.4 million hectoliters (204.3 million cases) of carbonated
soft drinks. South African Breweries plc has its primary listing on the London
Stock Exchange and is included in the FTSE 100 Index. It also has a secondary
listing on the JSE Securities Exchange South Africa, where it is included in the
JSE 40 Index.
Miller Brewing Company
Miller Brewing Company, a wholly-owned subsidiary of Philip Morris Companies
Inc., is the second-largest brewer in the United States. Over the past 10 years,
Miller Brewing Company's underlying EBITA has grown at a compound annual rate of
7.5%. In 2001, Miller Brewing Company's volume was 49.7 million hectoliters
(42.4 million barrels), with a market share of approximately 20%. In addition,
Miller Brewing Company brewed 9.7 million hectoliters (8.3 million barrels) in
2001 under contract brewing arrangements. The Miller brand portfolio has leading
positions in all key market segments. Principal beer brands include Miller Lite,
Miller Genuine Draft, Miller High Life, Milwaukee's Best, Foster's and an
attractive portfolio of flavored malt beverages. Miller Brewing Company operates
nine breweries in the United States, has a strong national distribution network
and is one of the lowest cost brewers in the United States. In the year ended
December 31, 2001, Miller Brewing Company generated revenue of $4.8 billion and
underlying operating companies income of $500 million. More information is
available at www.millerbrewing.com.
Philip Morris Companies Inc.
The Philip Morris family of companies, including Kraft Foods Inc. (Kraft), is
the world's largest producer and marketer of consumer packaged goods. Philip
Morris Companies Inc. recorded 2001 underlying net revenues of approximately $81
billion and owns 83.9% of the outstanding common shares of Kraft. The Philip
Morris family also includes Philip Morris Incorporated (Philip Morris U.S.A.),
Philip Morris International Inc., Miller Brewing Company and Philip Morris
Capital Corporation.
Certain trademarks and service marks mentioned in this release are the
registered property of, or licensed by, the subsidiaries of Philip Morris
Companies Inc.
Financial and Legal Advisors
Philip Morris' financial advisors for the transaction were Dresdner Kleinwort
Wasserstein, Inc. and Lehman Brothers Inc. Legal counsel was provided by
Wachtell, Lipton, Rosen & Katz, Clifford Chance LLP and Webber Wentzel.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and other
forward-looking statements that involve a number of risks and uncertainties and
are made pursuant to the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995 in the United States.
The following important factors could cause actual results and outcomes to
differ materially from those contained in such forward-looking statements: The
Company's consumer products subsidiaries are subject to unfavorable currency
movements, economic weakness in certain international markets, intense
competition, changes in consumer preferences and demand for their products,
changing prices for raw materials and local economic and market conditions.
Their results are dependent upon their continued ability to promote brand equity
successfully; to anticipate and respond to new consumer trends; to develop new
products and markets and to broaden brand portfolios in order to compete
effectively with lower-priced products in a consolidating environment at the
retail and manufacturing levels; and to improve productivity.
The Company's tobacco subsidiaries continue to be subject to health concerns
relating to the use of their products, including increasing marketing,
regulatory and smoking restrictions; the effects on consumption rates of price
increases related to concluded tobacco litigation settlements and excise tax
increases; governmental investigations; and litigation, including risks
associated with adverse jury and judicial determinations, courts reaching
conclusions at variance with the Company's understanding of applicable law,
bonding requirements and the absence of appellate remedies to get timely relief
from any of the foregoing.
The Company's consumer products subsidiaries are subject to other risks detailed
from time to time in publicly filed documents, including in its Annual Report on
Form 10-K for the period ended December 31, 2001 in the United States and its
Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.
The Company cautions that the foregoing list of important factors is not
complete and does not undertake to update any forward-looking statements that it
may make.
Fact Sheet
Miller South
Brewing African SABMiller plc
Company Breweries plc Pro Forma
Year to Year to Year to
March 31, March 31, March 31,
2002 2002 2002
---------- ----------- -----------
Operating Revenue $Bil $4.9 $4.4 $9.3
2001 EBITA $ Bil $0.4 $0.8 $1.2
2001 Worldwide Volume
Mil hectoliters 50 70 120
Mil barrels 42 60 102
Breweries 9 in 107 in 23 116 in 24
the U.S. countries countries
Employees 6,500 31,000 37,500
Key Brands Miller Lite, Pilsner Urquell, Pilsner Urquell,
Miller Genuine Castle, Tyskie, Castle, Tyskie,
Draft, Miller Snowflake, Lech Snowflake, Lech,
High Life, Miller Lite,
Milwaukee's Miller Genuine
Best, Foster's Draft, Miller
High Life,
Milwaukee's
Best, Foster's
CONTACT: Philip Morris Companies Inc., New York
Laurie Guzzinati, 917/663-2144
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