South Africa, Johannesburg: The value of the 430 million SABMiller shares held by Altria, formerly Philip Morris, has doubled since they were received as part payment for the Miller Brewing company in July 2002, Business Report communicated on March 7. The 68 % increase in the sterling price of the share and a 25 % appreciation in the sterling/dollar exchange rate have combined to lift the dollar value of Altria's investment in SABMiller to just over $7 billion (R41 billion) from $3.4 billion.

The $5 billion acquisition of the second-biggest beer group in the US was funded by a mix of cash and 430 million shares from the enlarged SABMiller group.

On the day before the transaction was completed on July 9 2002, the shares were trading at £5.12 on the London Stock Exchange. Last week SABMiller was trading at R8.555. In the same period, the sterling/dollar exchange rate has gone from $1.5348 to $1.92.

The multibillion-dollar deal, which took analysts and investors by surprise, propelled SAB from a leading emerging market beer group into the biggest global player behind Anheuser-Busch.

The acquisition was met with widespread skepticism because of SAB's lack of experience in a market as developed as the US and because Miller was struggling to maintain its second position. Reflecting this skepticism, SABMiller shares came under selling pressure in the weeks after the deal.

Although the 430 million shares issued to Altria represented a 36 percent economic interest in SABMiller in terms of the deal, Altria's voting rights were capped at 25 percent.

Altria was prohibited from selling any of the shares until June 30 2005. After that date, it is restricted from dumping shares. While the prospect of a share overhang is generally negative for a share price, any disposal of shares by Altria might help to improve the tradeability of this tightly held share.

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