(Bloomberg) — Altria Group Inc. is seeking to sell a portion of its stake in Anheuser-Busch InBev SA for as much as $2.2 billion to help fund its own share repurchases.
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Altria, which sells Marlboro cigarettes in the US, owns about 10% of the beermaker. It will sell AB InBev stock in a global secondary offering of shares in the US, Europe, the UK and other countries outside the US, Altria said Wednesday.
The tobacco group will offer the AB InBev US shares in a range of $60.75 to $62.75 each, according to people familiar with the plans who cannot be identified discussing confidential information.
AB InBev fell as much as 5.1% in extended New York trading and was suspended in Brussels when markets opened. Altria stock was little changed at the close on Wednesday.
Analysts have for years speculated that Altria might sell the stake in AB InBev, which dates back to when Anheuser-Busch acquired SABMiller in 2016.
“Over the decades of our ownership, the beer investment has provided significant income and cash returns and supported our strong balance sheet,” said Altria Chief Executive Officer Billy Gifford. He said the sale of about a fifth of its stake in AB InBev was an “opportunistic transaction” to generate a substantial return on its investment.
Buyback Action
Altria’s move comes just days after rival British American Tobacco Plc said it would sell as much as $2.1 billion of shares in Indian partner ITC Ltd. and use the proceeds to return cash to shareholders and invest in its business. The maker of Lucky Strike cigarettes has already made significant investments in research and development of alternative nicotine products.
Read More: BAT to Start Buyback After Selling Up to $2.1 Billion of ITC
The fact that Altria’s selling some of the stake now, as competition heats up in cigarette alternatives, suggests it may also use some of the proceeds to develop its own products, said Bloomberg Intelligence analyst Kenneth Shea said.
“That’s an awful lot of money for share buybacks,” Shea said. “Reading between the lines, they need that cash to help them accelerate their diversification efforts into non-combustible products.”
Altria’s alternative products include its NJOY vape products and On! oral nicotine pouches.
AB InBev said it will repurchase $200 million of shares directly from Altria when the offering is completed. Altria’s placing of about 2% of its existing stake in AB InBev could lead to some short term volatility in the share price but ABI’s participation points to discipline in capital allocation decisions, according to Edward Mundy, an analyst at Jefferies.
“We do not rule out scope for further buybacks in the second half and beyond given balance sheet repair and AB InBev’s growing cashflows,” he said.
–With assistance from Tiffany Kary.
(Adds share information, more comment. A previous version corrected spelling of Marlboro in first deckhead.)
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