Good day, ladies and gentlemen, welcome to the AB InBev analyst call. Hosting the call today from AB InBev is Mr. Carlos Brito, Chief Executive Officer, Mr. Felipe Dutra, Chief Financial and Technology Officer, and Graham Staley, Head of Investor Relations. To access the slides accompanying today's call, please visit ab-inbev.com, or the recommended transactions microsite at globalbrewer.com and click on the investors tab. Please note the disclaimer in relation to forward-looking statements on slides two and three of this presentation. Today's webcast will be available for online demand playback later today. At this time, all participants have been placed in listen-only mode, the floor will be open for questions from analysts following the presentation. If you wish to ask a question, you will need to press star and one on your telephone keypad.
It is now my pleasure to turn the floor over to Mr. Brito. Sir, you may begin.
Thank you, Theresa. Good morning, good afternoon, everyone, thanks for joining us on the call today. I'm here with our CFO, Felipe Dutra, and our head of IR, Graham Staley. The purpose of today's call is to update you on the path to closing of the recommended combination with SABMiller. I'll briefly cover the transaction structure and remaining steps to closing, spend most of my time on the strategic rationale for the combination. I will hand over to Felipe, who will cover the financial highlights. As you can see on slide five, we have received all the necessary regulatory clearances that were preconditions to launching the formal offer. We received unanimous support from the SABMiller board of directors for our revised cash offer, we issued all of the transaction documents necessary for the closing of the combination.
Slide six contains a summary of the documents published last week, which cover the three-step closing process, the listing of Newbelco shares, and the convening of the general meeting of AB InBev to approve the transaction. Slide seven outlines the remaining steps to closing. On September 28th, AB InBev, SABMiller, and Newbelco will hold their general meetings. On the same day, there'll also be an SABMiller U.K. scheme court meeting. On October 4th, SABMiller will seek sanction of the U.K. scheme arrangement in the U.K. court, on the following day, SABMiller's shares on the London Stock Exchange and the Johannesburg Stock Exchange will be delisted. The Belgium offer, in which AB InBev will offer to acquire Newbelco, will open and close on October 7th.
This will be the latest date by which SABMiller shareholders can make or revise their elections for the cash consideration or the partial share alternative, the PSA. We expect the merger of AB InBev into Newbelco to occur on October 10th, to be followed immediately by the closing of the combination. The new company's stock exchange listings will come into effect the following day, October 11th. Regarding the details of the transaction on slide eight, the boards of AB InBev and SABMiller have reached an agreement on the recommended acquisition of SABMiller by AB InBev. Under this agreement, SABMiller shareholders will be entitled to receive for each SABMiller share, either GBP 45 in cash or a partial share alternative comprised of 0.483969 restricted shares in Newbelco plus GBP 4.6588 in cash. The cash offer was unanimous by the board of SABMiller on July 29th.
Slide nine contains further detail of the cash offer and the PSA. As a reminder, the PSA will take the form of a separate class of restricted Newbelco shares, limited to a maximum of 326 million shares and subject to a five-year lockup. All SABMiller shareholders are entitled to elect for the PSA, if they so choose, but such an election must be in respect of their entire holding in SABMiller shares. If demand for restricted Newbelco shares exceeds 326 million shares, all elections, including those made by Altria and BATCo, will be scaled back pro rata. Altria and BATCo, who collectively own approximately 40.33% of SABMiller's share capital, have given irrevocable undertakings to vote in favor of the transaction and to elect for the PSA in respect of their entire SABMiller holdings of approximately 655 million SABMiller shares.
This will provide them with approximately 317 million restricted v shares prior to any pro rata scale back. We have been very successful in pre-funding the transaction with three bond issuances completed in the first quarter. These issuances, which result in net proceeds of $61.9 billion at an average coupon of 3.2%, allowed us to cancel $55 billion of the $75 billion senior facilities agreement entered into October last year. Slide 10 summarizes the three-step closing process, the corporate governance within New AB InBev, and details of New AB InBev's stock exchange listing, which will become effective on October 11th. These details are consistent with the Rule 2.7 Announcement in November last year. Let's now turn to the strategic rationale of the transaction and the exciting opportunities presented by the new company.
We believe the rationale for this combination, on page 12, is extremely compelling and would be in the best interests of both companies' consumers, shareholders, employees, wholesalers, business partners, and the communities which we serve. First and foremost, this combination would create the first truly global brewer, which would take its place as one of the world's leading consumer products companies. Importantly, we'll bring together a geographic footprint that's largely complementary and that provides access to key high-growth regions such as Africa, Asia, and Central and South America. We believe that the African continent, in particular, has very attractive markets and growth prospects and will be a critical driver of growth for the combined company, building upon SABMiller's strong South African heritage and success in the region. The combined company's joint portfolio of complementary brands would provide more opportunities for consumers everywhere to taste and enjoy the world's best beers.
The expertise of both companies would also create innovations to further enhance the consumer experience. The combination of these two great companies would bring together the experience, commitment, and drive of both organizations' employees to create a world-class combined global talent pool. In pooling resources and expertise, the combined company would be able to make a greater and more positive impact on the communities in which we live and work by providing opportunities all along the supply chain and aspiring to the highest standards of corporate social responsibility. Finally, we believe the transaction will deliver substantial value through the delivery of revenue, cost, and cash flow synergies. As you can see on slide 13, the combination of AB InBev and SABMiller would create one of the world's leading consumer products companies with pro forma revenue of $55 billion and pro forma EBITDA of $21 billion excluding synergies.
The truly global nature of the new company is a result of AB InBev's and SABMiller's largely complementary geographic footprints, as depicted on page 14. AB InBev does not currently have material presence in Africa, whereas SABMiller and its associates have an extensive operating history and presence there. SABMiller also has a strong presence in Colombia, Ecuador, Peru, India, and Australia, and we are particularly looking forward to working with SABMiller's joint venture partners and associates around the world. Similarly, AB InBev has a strong presence in the U.S., Mexico, Brazil, Canada, China, Argentina, South Korea, and the major markets within Europe. The combination would bring further diversification to our existing footprint, as per page 15, with increased access to developing markets.
The more developed markets in North America and Europe will represent approximately 37% of the combined company's revenues, compared to 47% of AB InBev's revenues today, with an increased contribution coming from Latin America and very meaningful contributions from Mexico, Asia Pacific, and Africa. The analysis on this slide does not reflect the new zone structure announced on August 4th. In due course, we'll be providing reference base data in line with the new structure, as we have done in previous combinations. This combination is all about accelerating our revenue growth, and one region which will drive much of that growth is Africa, as you can see on page 16. The African continent has several very attractive markets, with increasing GDPs, a growing middle class, and expanding economic opportunities. It's also becoming more important in the context of the global beer industry.
It is a great time to be entering this exciting market through a team that already has a long and impressive track record, strong heritage, and deep understanding of the region. Given Africa's potential, along with SABMiller's expertise and success in the region, we expect the continent to continue to play a vital role in the combined company. South Africa is the largest beer market, and we have demonstrated our commitment to the country through the package of initiatives put in place, including a ZAR 1 billion investment to support local agriculture and job creation. We have also created an Africa board chaired by Mr. Jabu Mabuza. Mr. Mabuza is currently the chairman of the board of Telkom SA, Sphere Holdings, and Business Unity South Africa, and has held a number of other board memberships, including Tanzania Breweries Limited, Castle Brewing Kenya, and South African Tourism.
He is also group chief executive of Tsogo Sun Holdings and CEO of FABCOS Marketing. We look forward to working with Mr. Mabuza and benefiting from his knowledge, experience, and insights in the region. The new company will have access to an exciting enhanced portfolio of great brands, and we're looking forward to expanding these brands into new markets as depicted on page 17. AB InBev's three global brands, Corona, Stella Artois, and Budweiser, will capitalize on common consumer values and experience across borders, and have the strength to be marketed worldwide. We're also excited about the potential of our multi-country brands, which resonate well with consumers in multiple markets, as well as our local brands, which offer locally popular tastes and connect with consumers in their home markets. We're looking forward to further developing our portfolio of brands in the years ahead.
Given that consumers around the world are more alike than different, it's not surprising that the commercial priorities depicted on page 18 of the two companies are very similar. We use different words to describe them, but the platforms are very consistent. We'll continue to grow our global brands, now with the opportunity to do so in many new markets. We'll also continue to focus on the premiumization and integration of the beer category, bringing excitement and aspiration to the consumer's experience with beer. Our large portfolio of core brands will be a major priority, and our focus will be on elevating the perception and relevance of these brands with our consumers. Finally, we remain committed to developing the near beer segment through innovations that compete for greater share of total alcohol.
Our global growth will be fueled by the exceptional people around the world from both AB InBev and SABMiller, and we look forward to developing and providing opportunities to the talent we will have in the combined company. The passion, dedication, and expertise of the combined talent pool will allow us to learn from each other and take advantage of new market and brand opportunities. Turning now to page 20. We believe very strongly that global companies have a responsibility to contribute to the world around them. AB InBev has been a leader in this area through our Bringing People Together for a Better World platform. SABMiller has also been focused on strong corporate citizenship with the commitment to improving livelihoods in local communities.
We are therefore developing a sustainability strategy for the new company that's designed to drive positive changes in our communities while improving business performance, focused on five areas: water, climate, agricultural development, economic growth, and smart drinking. The new company will build upon the work of both AB InBev and SABMiller to lead the way in sustainability. I'd now like to hand over to Felipe, who will take you briefly through the financial highlights of the transaction. Felipe.
Thank you, Brito. The combined annual revenues of the two companies on a pro forma basis, excluding synergies and adjusting for divestitures, exceeds $55 billion, while the adjusted EBITDA of the two companies combined is over $21 billion, as shown on page 22. These figures reflect the transaction-related divestitures which have already been announced. SABMiller's Central and Eastern European brands and its ownership in the Distell Group have been treated as assets held for sale and excluded from the pro forma results. We expect the combined group to generate attractive synergies, creating additional shareholder value as depicted on page 23. We are reconfirming our expectations of at least $1.4 billion per annum in recurring run rate pre-tax cost synergies, consistent with the 2.7 announcement in November last year. This is based on current and constant foreign exchange rates.
These cost synergies are in addition to the $1.05 billion of cost savings previously identified by SABMiller, of which $547 million had been delivered by the 31st of March this year, and which is reflected in the pro forma financials. We continue to expect the incremental cost synergies to be phased in over four years following the completion of the transaction, reaching the recurring run rate of $1.4 billion by the end of the fourth year. We expect the delivery of cost synergies to require estimated one-off cash costs of approximately $900 million to be incurred in the first three years after closing. For those functions where integration planning has been possible within the combined group, AB InBev currently expects an overall potential job reduction of approximately 3% of the total workforce of the combined group.
It is anticipated that these job reductions will be implemented gradually in phases over a three-year period following completion. There are some functions within the combined group where it has not been possible to advance integration planning because of regulatory restrictions. We are therefore unable to give any view on the impact of the transaction on employment in these functions. Please note that we have updated the split of the sources of cost synergies. We now expect procurement and engineering to generate 25% of the cost synergies rather than 20% as announced in the 2.7 document. Similarly, we now expect realignment of overlapping corporate and regional headquarters to generate 30% of the total cost synergies rather than 35%. The synergies numbers do not include potential revenue and cash flow synergies, which have not been quantified at this time. Moving on to slide 24.
Both SABMiller and AB InBev have significant expertise in specific areas. We look forward to sharing that expertise across teams and markets to create additional value and drive growth. For the last several months, our companies have been working together on integration planning, exchanging information in a clean room environment, and performing market visits to understand each other's ways of working. We are looking forward to continue this work up to and after closing. With that, I will leave you with the summary of next steps that Brito presented early now on page 26, and head back to Therese to begin the Q&A section. Thank you.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star then one on your telephone keypad. If you are using a speakerphone, please pick up the handset before pressing those numbers. You may remove yourself from queue at any time by pressing the pound sign. Once again, if you would like to ask a question, please press star then one. We'll go to line of Edward Mundy with Jefferies. Please go ahead.
Hi, morning, afternoon everyone. A couple of questions. For foreign dividends, I think with your Q1 results, you removed any explicit reference to the 3%-4% dividend yield range. I know that longer term you still aspire for yields comparable with other consumer products companies, but could you provide a bit more of a steer on the payout ratio initially after the closing of the transaction? Second question is on slide 12. Relative to your slide deck from the 11th of November, there's an additional bullet around further product and service innovations, which presumably you picked up from market visits to SABMiller. I was wondering whether you could perhaps provide a bit more color here, given you've added this additional bullet.
Thirdly, on slide 23, could you perhaps provide a bit more color as to why you've tweaked down corporate headquarters overlapping regional headquarters are down from 35%-30%?
Yeah, let's see.
Okay, go ahead.
This question on the dividend. Our dividend policy remains unchanged. We see a flow of dividend growth over time. Of course, in the short term, we have to balance that with the deleveraging, which is also a priority. There is no reason why we should expect dividends to be reduced, but shareholders should appreciate that as we balance dividend flow and deleveraging in the short term, dividend growth should be somehow modest. Taking that into account, yeah, dividend yield is one piece. Dividend payout is the other piece. At the end of the day, it's what matters for the combined company, what makes more sense for the combined company. These are guidelines. These are not straitjackets. Again, the important is we see a growing dividend flow over time.
Very clear. Thanks.
On your second question about the bullet innovation, I think as we add more time to interact with our future colleagues and visit some markets, despite all the restrictions, of course, imposed by the panel in terms of what can be done and exchanged during the integration planning stage, we got very excited about some of the things we saw in terms of, for example, dollar sales, which has to do with the go-out-to-market piece with affordability, which has to do with the way you tackle some developing markets and consumers locations. That's why we decided to add that bullet because those things, as we had the opportunity to talk to people, even with the constraints and visit the markets and get a better feel for it became clear to us that would be also interesting on the AB InBev side.
It would be more like give and take from both sides. That's what the beauty of a combination. You have companies that are dealing with a beer market, but in different realities. Because of our footprint that's highly complementary, it is so true that they had to develop toolkits in different markets than the ones we did. The beauty is now comparing tool sets and toolkits, we're learning more and more about things that can be applied on both sides of the new combined company. In terms of your third question, the first time we spoke about synergies and their breakdown, it was a top-down approach. It was a desktop type approach.
Of course, again, even with the restrictions, as we got more into the numbers of what could be exchanged and did some traveling and meeting people, it got more clear, as in any combination as you go through the planning, that some lines could bring more value, some other lines maybe less value. At the end of the day, we're confirming the same $1.4 as we did in November this time around, and the splits are a bit different, but that's because we have more detail now than we had then.
Thanks, Brito. Just a final follow-up. Have you got a name for the new company yet?
The name will be confirmed at a later stage before closing.
Okay, thanks.
Thank you.
Next we'll go to line of Trevor Stirling. Please go ahead.
Hi, Brito, Felipe, and Graham. Two questions on my side, please. The first one is there any reason, this is probably more for Felipe, to expect there could be tax synergies in the combined entity? Or should we be thinking more to take a blended average of the ABI and the SAB tax rates? The second question, there's one business that isn't mentioned at all in the documentation I can see, which is Castel. Should we assume that SAB's relationship with Castel remains unchanged by the combination?
Yeah, at this point, Trevor, I would think about a blended between the two companies in terms of tax rate. We are conservatively assuming that part of this incremental debt, for example, or improved incremental debt is not going to be deductible. Of course, as we get to know more about the business, that is an area of opportunity, but at this point, we are conservatively not assuming any deduction and therefore looking at the blended is probably the best assumption at this point.
Great. Thank you very much, Felipe.
Welcome.
Trevor, on your second question about Castel, of course, Castel is a very important relationship and partnership that SAB has and have developed over the years. Of course, to this point, only after closing that we're going to be more in touch with Castel and his people, Mr. Castel and his people. Of course, a very important relationship that we intend to continue to develop and evolve.
Great. Thank you, Brito.
Thank you, Trevor.
Next we'll go to the line of Fernando Ferreira. Please go ahead.
Question for Brito, Felipe, and Graham. I have two questions, if I may. First one related to the synergy guidance and the other one regarding-
Fernando, can you speak a bit louder, please?
Sure. Two questions.
Bit louder.
Yeah. Can you hear me now?
Yeah, much better.
Okay. Two questions on my side. First one on the synergy guidance, second, the regional structure in South America. On the synergy guidance, I understand your comments that the $1 billion estimate provided by SABMiller was probably reflecting the entire cost base of the group and the $1.4 billion would come on top of that. The question is really if you plan on updating the market into a single synergy guidance at some point, or we'll basically have to monitor the progress throughout the quarterly earnings based on these initial figures. The second question on South America, when we look at Colombia, Peru and Ecuador, would we be able to extract any synergies with Ambev's contiguous territories like Brazil and Argentina, the structures will have to remain completely separate?
Well, on the synergy piece, we will continue to update the market as we've done in previous transactions every quarter during a period of time. We keep you abreast of what's happening. We'll do it as one number. We don't have to do the reconciliation. We'll do it for you. In terms of structuring Latin America, COPEC will be a new region. Of course, as we said, I think it's in the documents. It is in the documents. The synergy number will affect both sides of the new combined company. There'll be cross synergies on both sides, on the SAB side and the ABI side.
Great. Thank you, Brito.
Excellent.
Next we'll go to the line of Chris Pitcher. Please go ahead.
Thank you very much. A couple of questions, please. Brito, could you talk a little bit about key staff retention? Because obviously you've put out the new executive for the business, and maybe give a bit feel for the level of retention below that level. You mentioned in the presentation also that you haven't given revenue or cash flow synergies targets yet. The last two transactions you've held back from giving revenue synergy targets. Should we expect that again to be unquantified, but at some point some cash flow synergies to come through? Can you give us any feel for the regional split between those synergies? That would be very helpful. Thanks.
In terms of our future colleagues, then our company, Chris, people is at the key of everything we do. Of course, one of the things that we're mostly happy about is that during the trips and the business meetings we had and all that, even with the constraints of the panel, we were able to meet some very, very good people, some great talent. That's what's important for us because at the end of the day, SABMiller is really its people and the group. We've been from day one, very keen into traveling, getting to know people, getting them excited about what the future company holds for everybody, including them. That it's going to be one company and that there'll be lots of opportunities and exciting growth opportunities for all of them.
Of course we know that there'll be some duplications and some people will have to leave. That of course in any combination is the case. When you think about the fact that our footprint is highly complementary, it is of course fair to assume that most people, especially in the zones, will remain in the new company, and they know that. Of course, they're very excited about being part of a bigger organization where they see that their careers can flourish even in a more global way. Retention is key for us. We have like every time we have retention mechanisms, we have ways to incentivize people as true owners, because at the end of the day, that's what we like. We like owners, not professionals. That's what we've been talking to them from day one.
Even in the 2.7 announcement back in November, we had already details on some of the retention or equity mechanism that would be offered to everybody, we are pretty much within those boundaries. In terms of revenue and cash flow synergies, we've said at this point that we'd see opportunities, we decided not to quantify, and you're right, that's what we do every time. We focus on the cost synergies in terms of numbers. Of course, we try to extract the other synergies as well on the cash flow and revenue side. On the revenue side, for example, we've said from day one that we're very excited about what our global brands can do in an extended geographical footprint. Those are very interesting markets, ones that our global brands can do very well.
Now with the SABMiller knowledge and go to market, we think we'll get those amazing brands to those consumers in a better way.
Just in terms of sort of the regional synergies, is that something you're prepared to give us any feel for? I appreciate there's a limited number of regions you're actually acquiring.
At this point, Chris, we'll have to limit ourselves to what is available in the public documents, we cannot go into that level of detail, unfortunately.
Sorry, one final point. Brito, you mentioned you've traveled extensively. Have you met with all the key government figures as well as the key SAB staff in the countries involved?
The traveling, of course, was mostly to meet our future colleagues, for sure, in South Africa. That's where we met government officials. That's public in dealing with the public concerns and public interests. That's what's public, yeah.
Okay. Thank you.
Thank you.
Next, we'll go to line of Anthony Bucalo. Please go ahead.
Hi, Brito. How are you?
I'm good.
One question. You're going to be a very substantial Coca-Cola bottler on top of being a substantial PepsiCo bottler. In a practical way, how does that work? How can you balance the interest and needs of your company as well as the two big franchise companies?
Well, Tony, the transaction is not closed yet, so it's too soon to talk about this. We don't even have access to contracts and stuff at this point, so it's too soon to talk about it. SABMiller, of course, will retain ownership of its non-alcoholic business in Africa and Latin America. AmBev, of course, has a longstanding partnership with Pepsi for bottling operations in several Latin American countries. As does SAB, by the way, with Pepsi. Again, the transaction has not closed yet, so it's too soon to comment on this.
Thank you. Another thing, Brito, the Eastern European businesses that you sort of agreed to sell back in April, we haven't heard anything specific about that yet. Is there anything going on or is that still an ongoing process?
Well, again, this is something that at this point we also cannot comment. You have to understand that within the U.K. takeover panel rules, we can only comment with what's in the market. It's clear that, of course, we have to divest those assets, but at this point, that's it.
Okay. Thank you, Brito.
Thank you.
Next, we'll go to line of Robert Ottenstein. Please go ahead.
Great. Thank you very much. On Africa, obviously, you're setting up a board and that's great, it's hard to govern a business as diverse as that and then as intricate as that by a board. Can you walk us through some of the kind of reasons to believe that you have the right people in place to make the most of the great potential of the business there that you've highlighted as key to this transaction?
Well, Robert, again, as in any transaction that we've done in the past, most of the management will remain in place. That's no different this time around. Of course, we still don't have visibility on that. We just announced EBM. As we announce the EBM management one, which we should do in the next few weeks before closing, for sure, you'll see that what we've done in the past will very likely again be reflected in that. Therefore, we're drawing, of course, on experience and depth of management that SAB has in Africa, throughout Africa, in different countries. Of course, we'll take advantage and try to get these people to be excited, our future colleagues, about the new company as we are. They remain, and they help us continue to build that amazing growth story that Africa has been for SABMiller.
Again, I guess it will be more clear as we go through the next layers of management announcement, at this point, that's what I can say.
Great. Just as a follow-up, you noted that through the process over the last few months, you've been able to get a little bit more visibility on the business and therefore have had more or less confidence from a bottoms-up perspective on the synergy numbers. Can you also perhaps outline for us other things that you've learned about SAB's business that you can share with us that perhaps weren't completely clear, weren't completely visible to you when you made the initial offer?
Well, I think one thing that was nice to confirm, and it was not new, but it was nice to confirm, is that despite calling some same things different names, on the commercial side, as we depicted on page 18, at the end, we're very focused on the same drivers. It's just that we have sometimes different experience and different learnings on those drivers, which is the part that will enrich a lot of discussion. We also want to grow brands from being local to regional to eventually global. You look at Castle, for example, as an amazing example of a brand that originated in South Africa. Today, when you look at East Africa, the countries that SAB manages the business, The Castle's pretty much everywhere, so it's become more and more of a pan-African brand.
That's the same kind of mindset we have leading, of course, if you continue on that to a global brand. The second thing is that they also are very focused on trying to premiumize the beer experience and trying to grow the beer category. On the beer category, they even have more experience than we do in trying to enlarge the beer category. Both of us are trying to premiumize the beer experience and premiumize our portfolios. That, again, very similar. On the core brands, we both see the need, because of the premiumization that's out there, to elevate the core proposition that we have, because otherwise, these core brands, they become too much outdated given the premiumization that's happened in the marketplace.
Both, again, we have different entry, at the end of the day, it's about getting those core brands that have been important for many years, that continue to be important, that pay the bills, to become more contemporary, to become more in tune, to refresh, and to continue to be very connected to legal drinking age type consumers and young adults. The fourth one is trying to develop what we call the near beer segment or what's right after beer in the alcohol beverage landscape. That, again, is something that they had a very similar mindset. Cider, for example, is something we've developed. We have cider as well, and so on. I think flavored beers. We have some of the same pillars, but the beauty here is that because they are in different markets, they have different toolkits for the same pillars.
The beauty is when you put the two together. Those are things that were nice to confirm as we went through different visits and market visits and met new people because at the end, we're working the same logic, just with different skill sets, and that's the beauty of it.
Great. Just one last question. After the Anheuser-Busch acquisition, the key focus on management incentives or one of the key focuses and triggers was a certain balance sheet target. The sense I'm getting is that the targets here may be more, besides obviously the synergy side, may be more focused on organic growth. Can you elaborate at all in terms of how some of the incentive packages that you're putting together for top management, how they look and what those main goals are going to be? Is that correct, that a lot of them will be based on organic growth?
Well, Robert, again, we can only talk about what's public. One way to think about it is that when we did the AB transaction, we were in the middle of a global financial crisis, and deleveraging, of course, was very important. Today, we're in a different world. I'm not saying deleveraging is not going to be something that is important as well. Of course, we're in a different world. We're not in a crisis type situation. Of course, there'll be more of a balance, as we had in the Modelo contribution. It was the same thing. There's more of a balanced approach to growth and value creation, as opposed to just a big focus on deleveraging.
Thank you very much.
Next, we'll go to line of Pablo Zuanic. Please go ahead.
Yes. Thank you. Two questions. One, in some markets like South Africa, for the deal to be agreed by the government, there were some restrictions on your ability to reduce cost. Today, you have not adjusted your synergy or cost savings guidance. Obviously, that means that your ability will not be impeded. It seems that there were restrictions that I thought were significant and could have affected your ability to cut cost. The second question, if I refer to slide 31, is this going to be the first time that the AB InBev control group is going to be diluting itself, and they will own 44% of the company. Do they have a right of first refusal when the five-year local period expires to buy the stake that will be owned by AB InBev Co? Thanks.
Well, on the synergies, Pablo Zuanic, at this point, again, we have to work with what's public. What we're doing now is we're confirming the $1.4 billion. The only thing we did is that we changed slightly the breakdown between the four major buckets of where the synergies were going to be generated, and that accounts for everything you said before, because that's all in there. On the second question?
On the second question, the relationship between shareholders, including board representation, so on and so forth, is reflected in the documents, and you should expect when and if they decide to sell that disclosure is going to be made on an orderly manner in the marketplace. That's essentially it, Pablo Zuanic.
Okay. Thanks. Just a quick follow-up. I want to ask a Coca-Cola question, again, in a different way, if I may. I understand that not everything is finalized yet. Coca-Cola, one thing is that you own the 57% stake in CCBA, but Coca-Cola, at the end of the day, owns the distribution right, and it's up to them whether they keep them with CCBA or not in the current ownership structure. Are those conversations still ongoing? Related to that, my understanding is that the Coca-Cola operation, they are bottling and the beer business were not integrated at all. The distribution, production were separate. Even in procurement, there wasn't much being done together. Are there a lot of opportunities on that front as those two businesses are integrated? Thanks.
Well, Pablo, on this one, again, the transaction has not closed yet. It's too soon to talk about it. We'll come back to this topic in due course after closing.
All right. Thanks.
Thank you.
Next, we'll go to the line of Mark Swartzberg. Please go ahead.
Yeah, thanks. Good morning, Brito. Morning, everyone. One question.
Good morning.
Yeah, on the cost synergy question there. The fact that you have not included customer-facing sales and marketing and consumer in your arrival of this $1.4, and in time, that could be a source. Is there any reason not to look at prior transactions and think that they provide some benchmark for us about how that might be a source of added savings?
Well, in terms of sales and marketing, what we try to do is we try always to procure better, we never count on cutting sales and marketing as a way to get the synergies. I mean, just look at the Mexican situation. We have increased sales and marketing. Look at the U.S., we have increased sales and marketing if you look throughout the years. On the procurement side, when we say here procurement and engineering, procurement covers, in principle, everything we procure.
To be clear, going forward, post-closing, you don't think the customer-facing and consumer area of costs will be a source of potential savings.
Well, what we can say at this point is what we have there on page 73 is, in terms of source of synergies and where they come from. In terms of procurement, we said that 25% of the savings would come from procurement, up from 20%, and that is a source of raw materials and packaging, and engineering and associated processes. Those are broad themes, that's what we say at this point.
Fair enough. Thank you, Brito.
Thank you, Mark.
We'll go to the line of Chris Pitcher. Please go ahead.
Thanks so much. Apologies for the follow-up. It's a technical question, again, going back to the soft drinks business. Can you update us on how that falls within the Black Economic Empowerment agreement, the Zenzele scheme, in terms of EBITDA under the new agreement, whether the EBIT from the soft drinks business is included in the EBIT on that scheme for working out the value that you talk about?
Chris-
This is Graham, Chris. I'll have to follow up with that one. I'm not quite sure of the technical answer on that. I'll have to go and check the documents for you, but I can give you a call after this conference is finished.
Okay. Thank you very much. That's it from me. Apologies for the follow-up.
No problem, Chris. Thank you.
Thank you very much for joining today's call. I would now like to pass the floor back to Mr. Brito for closing remarks.
Well, thank you, Theresa. In wrapping up, I'd like to reiterate that we believe the strategic rationale behind the combination with SABMiller is extremely compelling, from the immediate value realization it offers to SABMiller's shareholders, to the growth prospects it creates for the combined company. To put it simply, we believe more can be achieved together than apart. With that, thanks for your attention, and have a great day. Thank you.
Thank you very much. This concludes the conference call for today. Thank you all for participating.