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(Bloomberg) -- AB InBev’s $104 billion takeover bid for SABMiller Plc hit a snag after the target company suspended integration of the two brewers following resistance from shareholders who say they haven’t been compensated enough for the pound’s recent plunge. SABMiller shares fell the most in almost 10 months.

SABMiller managers asked employees to halt work knitting together the two companies, with Chief Executive Officer Alan Clark saying in an internal memo that “there should be no contact with AB InBev with immediate effect.” Advisers continue to work on the transaction, and SABMiller’s board hasn’t decided to walk away from the deal as it reviews an improved offer from AB InBev, people familiar with the matter said. The brewers declined to comment on the memo reviewed by Bloomberg News.

What looked like a done deal just weeks ago has morphed into a battle pitting the world’s biggest brewer against SABMiller investors who oppose terms they say withered since the U.K. voted last month to leave the European Union. While AB InBev nudged up its bid Tuesday, some shareholders remain opposed -- raising further questions over completion of an industry-transforming transaction affecting companies around the globe and iconic brands such as Miller, Peroni and Snow.

“It suggests that they think that the risk is real that shareholders won’t approve this,” said Philip Gorham, an analyst at Morningstar Inc. “We don’t know at this stage if the deal will close. It’s an unexpected wrinkle.”

SABMiller dropped 1.9 percent to 42.98 pounds at 9:52 a.m. in London after falling as much as 2.8 percent, the biggest intraday decline since Oct. 12. AB InBev, which is scheduled to report first-half results Friday, lost 2.4 percent to 110.4 euros.

For a look at how bond investors are reacting, click here.

According to the memo, so-called convergence planning is on hold, and all meetings and calls between the companies should be postponed until further notice while management reviews the latest proposal. The same applies to contact with representatives of Asahi Group Holdings Ltd. and Molson Coors Brewing Co. both of which are buying assets from the brewers as part of the deal.

Two-Pronged Plan

Asahi will closely monitor developments as its 2.55 billion euro ($2.8 billion) purchase of Peroni, Grolsch and Meantime beer brands in Europe from AB InBev is subject to completion of the deal between AB InBev and SABMiller, Takuo Soga, a Tokyo-based spokesman for the Japanese brewer, said by phone Thursday. Asahi has no plans to review its own deal at the moment, he said.

Representatives for China Resources Beer Holdings Co., which plans to raise HK$9.5 billion ($1.2 billion) in a Hong Kong share sale to help finance the purchase of the remaining stake in a Chinese venture with SABMiller, declined to comment.

At the heart of the confrontation is a complex two-pronged takeover proposal designed to please both small and institutional investors as well as SAB’s two biggest stakeholders, Altria Group Inc. and Bevco Ltd. Those two parties were granted a cash-and-stock option, whose value has soared from 39 pounds when the deal was announced last year to about 50 pounds, while the all-cash bid hasn’t benefited as much.

AB InBev sought to address the mismatch on Tuesday by raising the cash bid to 45 pounds a share, 1 pound more than the prior offer. It also increased the amount of cash in a cash-and-stock alternative.

Still, some shareholders remain on collision course. SABMiller holder Aberdeen Asset Management said even the revised proposal undervalues the company and is unacceptable because stockholders are receiving different treatment. Aberdeen has been paring its stake in SABMiller, and still has 19 million shares. All told, the bid is valued at 79 billion pounds, making it the biggest takeover approach in the brewing industry.

AB InBev’s bid has already received regulatory clearance from South Africa and the U.S. in recent weeks, and is awaiting approval from Chinese regulators. Part of the approval process includes a complex set of divestments around the globe to appease regulatory concern. Molson Coors is set to acquire SABMiller’s stake in the MillerCoors brewing venture.

Molson Shares

The revelation of the suspended integration sent Molson down 5.1 percent Wednesday in U.S. trading. Both AB InBev and SABMiller had closed in Europe when the memo become public.

SABMiller said Tuesday that its board would consult shareholders about AB InBev’s new offer and make an announcement thereafter. Altria and Molson Coors declined to comment.

The deal to merge SABMiller and AB InBev, termed “Megabrew” by analysts, would create a behemoth controlling about half of the industry’s profits. The combined company will have the No. 1 or No. 2 positions in almost all of the world’s biggest beer markets, and provide AB InBev its first toehold in Africa, where about 65 million people are due to reach the legal drinking age by 2023.

The U.K.’s decision to leave the European Union, following a popular referendum last month, has sent shock waves through the European corporate landscape.

Companies ranging from Siemens AG to luxury-goods maker Burberry Plc have put future investments under review, and consumer-facing corporations including low-cost airline EasyJet Plc have said the vote has increased uncertainty as the U.K. embarks on the arduous process of uncoupling from decades of political and economic entanglement with the European bureaucracy.

--With assistance from Joshua Fineman Jennifer Kaplan Monami Yui and Daniela Wei To contact the reporters on this story: Thomas Buckley in London at tbuckley25@bloomberg.net, Ruth David in London at rdavid9@bloomberg.net, Matthew Boyle in London at mboyle20@bloomberg.net. To contact the editors responsible for this story: Matthew Boyle at mboyle20@bloomberg.net, Phil Serafino

©2016 Bloomberg L.P.

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