The Belgium-headquartered group could have multiple targets when it comes to getting its cheque book out again

The Belgium-headquartered group could have multiple targets when it comes to getting its cheque book out again

Where next for Anheuser-Busch InBev

The brewer is still facing long-term concerns over growth in the US, while Brazil may fail to rebound from the current downturn, after the World Cup. “The logical conclusion ... is that A-B InBev may need to execute another deal to maximise its balance sheet,” according to Grupo Santander analyst Anthony Bucalo in a note today (2 June).

The media and analysts love to speculate about M&A, but Bucalo offers some intriguing pointers on where A-B InBev may set its sights next.

First up, there is the old chestnut that is SABMiller. The long-running rumour about an A-B InBev swoop for SABMiller has fired up again of late. But, the analyst remains unconvinced a deal will emerge for a while yet.

Bucalo points to the fact that the UK-headquarted firm's purchase of Foster's in 2011 made the company “significantly more expensive”. As such, the group's price tag would be “prohibitively high” for the Budweiser brewer. On top of that, he adds: “We think A-B InBev will need to sort out its own relationship with PepsiCo first (due to AmBev's PepsiCo distribution, A-B InBev is the largest independent PepsiCo bottler) before considering a next step as dramatic as buying SABMiller.”

The analyst is not ruling out A-B InBev tabling a bid for PepsiCo, however. “We think the possibility of ABI buying the beverage businesses and possibly all of PepsiCo still remains,” he says. Bucalo flags that A-B InBev could extract extra value from Pepsi's North America business and LatAm beverage assets.

That said, he adds: “If PepsiCo remains on the defensive strategically and is unwilling to sell if hypothetically approached by A-B InBev, we also see the possibility of ABI/AmBev simply severing its relationship with PepsiCo when its contracts expire at the end of 2017.” 

The analyst offers a few more twists. He suggests that if a PepsiCo, A-B InBev tie-up fails, this could leave the Budweiser company to bid for SABMiller through its AmBev unit. This could happen if A-B InBev's ownership group did not want to be "diluted" from control of the overall business. Bucalo also suggests it would make sense as AmBev would be well-placed to run SABMiller's South & Central American businesses. 

The analyst posits two more intriguing possibilities. One is that if A-B InBev severs ties with PepsiCo and SABMiller remains “uncooperative” towards a deal then the next target is: The Coca-Cola Company. However, Bucalo says Grupo Santander has remained “quietly sceptical on this” as there are “extraordinary conflicts that could arise with bottling partners should A-B InBev take control of Coca-Cola.” 

Finally, as a “long shot”, Bucalo offers up Diageo as a possible target for the Budweiser brewer. But, the note says: “Ultimately, Diageo is a spirits company and we are sceptical that A-B InBev has the right skill sets, or even the right mind set, to be in the spirits business.” 

Like I said, M&A speculation is always fun.