Singer's Elliott Takes Stake in SABMiller

Jul 14 2016 | 11:02pm ET

The U.K. unit of Paul Singer’s activist hedge fund Elliott Management has taken a small stake in global brewing giant SABMiller as controversy surrounding the firm’s merger with Anheuser-Busch InBev builds.

The takeover, labeled as the largest in British corporate history by Reuters, will bring together the world’s top two beer companies and combine global brands such as Budweiser, Stella Artois and Corona together with smaller ones like Peroni, Grolsch and Pilsner Urquell. Once completed, it will result in a company responsible for brewing almost a third of the beer on the planet.

The hedge fund’s U.K. unit, named Elliott Capital Advisors, acquired the 1.3008% stake through a contract for difference, according to an article in The Daily Telegraph. CFD's are fairly common in Europe but not allowed in the United States,

Elliott, famous for a 15-year tangle with Argentina over defaulted bonds and for an ultimately unsuccessful attempt to block a merger between two Samsung-related businesses in South Korea, also disclosed a short position in AB InBev through a regulatory filing. The tactic is typical for event-driven investors looking to go short the purchasing firm in a merger and long the company being bought. 

The InBev/SAB deal, which was constructed as a controversial two-step process in order to help large SAB shareholders minimize taxes through the issuance of unlisted Inbev stock in lieu of cash, has come under renewed scrutiny following the Brexit referendum. Due to the resulting steep decline in the pound, the stock and cash combination is now worth £50+ per share, significantly more than both InBev’s original £39.03 combo offer and its £44 all-cash offer. 

Elliott’s involvement in SABMiller has raised speculation that additional pressure will be brought to bear on InBev to sweeten the deal. When originally announced last November, the £71 billion merger was worth around $108 billion. Since the Brexit vote, that tally has dropped as low as $94 billion. 

Singer founded Elliott in 1977 and has since become one of the world’s most prolific activist investors. The firm manages approximately $27 billion through a number of investment vehicles active in debt, equities, commodities, currencies and various other asset classes.

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