AmBev announced its intention to propose to shareholders at an EGM a transition of the company’s current dual stock capital structure comprised of voting common shares and non-voting preferred shares into a new, single-stock capital structure comprising exclusively of voting common shares.
The operation, which is to be implemented by mans of a stock swap merger under the Brazilian Corporations Law, ascribes equal value to each common and preferred share of AmBev. The EGM which will vote on the transaction is to be held in the first half of 2013 (exact date not yet set).
AB InBev and FAHZ, which together hold 61.9% and 9.6% respectively of AmBev (AB (
67,59 EUR, 0,58%) holds 74% of outstanding ordinary shares and 46.3% of preferred shares –FAHS holds 17.1% of the outstanding ordinary), will respect the will of AmBev’s minority shareholders, to be expressed separately. Hence AB InBev will either not vote or vote to confirm thedecision of the minority shareholders.
The transaction is meant to increase AmBev’s share liquidity while also eliminating certain administrative and operating costs. AmBev announced it intends to increase the level of minimum mandatory dividend from 35%of adjusted net income today to minimum 40% after the transaction. Another consequence is that the tax benefits from the amortization of ~BRL105m goodwill currently booked at InBev Part are to be shared with all AmBev shareholders.
Our View:
The proposed simplification of AmBev’s capital structure does not impact our investment thesis on AB InBev. We stick to our Hold rating and € 67 target price for now, as we believe that this well managed company with strong market positions and pricing power in some of the world’s largest beer profit pools like the US and Brazil is fairly valued.