Tobacco company Altria Group Inc. is selling more than $2 billion worth of its Anheuser-Busch InBev shares in a secondary offering, reducing the cigarette manufacturer’s stake in the Belgium-based brewer by about 18%.
Experts say this isn’t reflective of Anheuser-Busch’s poor sales performance from the past year but rather a strategy for Altria to redistribute its investments.
Altria, which is the parent company of brands such as Marlboro cigarettes and Black and Mild cigars, is selling 35 million shares. Anheuser-Busch announced that it will repurchase more than 3.3 million shares for approximately $200 million. Altria said the underwriters also have a 30-day option to buy up to 5.25 million additional Anheuser-Busch shares.
This leaves Richmond, Virginia-based Altria with about 159 million Anheuser-Busch shares, dropping its stake in the alcohol giant from about 10% to about 8%.
Glenn MacDonald, a professor of economics and strategy at Washington University, said this repurchase agreement is not a signal about the health of Anheuser-Busch.
“A lot of people own chunks of A-B,” MacDonald said. “It doesn’t have to do with performance. Altria is asking themselves where they want their money. With tobacco, there’s trouble all the time. … They’re always making different moves.”
Altria said it will use the money for additional share repurchases of its own common stock and that the repurchase program will significantly enhance cash returns to shareholders.
The $2.4 billion accelerated share repurchase program increases Altria’s existing $1 billion share repurchase program, which was approved by the board in February.
“These opportunistic capital allocation decisions reflect our ongoing confidence in Altria’s future and the significant value offered in our shares today,” Altria CEO Billy Gifford said in a statement.
Because the buyback program will free up cash, MacDonald, of Washington U., said Altria can invest in industries that aren’t as heavily regulated as alcohol and tobacco. Already, Altria has investments in Cronos Group, a global cannabinoid company and last year acquired NJOY Holdings Inc., an electronic cigarette company.
“Instead of history, let’s look to the future,” MacDonald said of Altria’s move away from Anheuser-Busch. “This is nothing for A-B. It’s a big, healthy company that has a lot of investors.”
The secondary global offering will include an offering of American depositary shares in the U.S., an offering of ordinary shares in the U.S., a private placement of shares in the United Kingdom and Europe, and an offering of shares in other countries outside the United States.
Altria has held a stake in Anheuser-Busch since 2016. Anheuser-Busch shares dropped around 5%, or $4, last Thursday following the repurchase announcement. Anheuser-Busch stock was about $60 a share around 12:30 p.m. Monday.
“We remain disciplined in our capital allocation decisions and participating in this offering is consistent with our strategy,” Anheuser-Busch InBev CEO Michel Doukeris said in a statement last week. “Altria remains a significant shareholder of our company and we look forward to continuing our important shareholder relationship with them.”
Anheuser-Busch sales at the company decreased by about $1.5 billion in North America last year following backlash last spring when it sent a personalized Bud Light can to a transgender influencer as part of a marketing campaign.
Earlier this month, Anheuser-Busch narrowly avoided a strike as 5,000 Teamsters threatened to walk off the job if demands for job protection and better retirement benefits weren’t met in their new contract. About 450 Teamsters work at the company’s North American headquarters and brewery located in St. Louis.
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