SABMiller, Anheuser-Busch InBev transaction 'likely' - Analysis
Anheuser-Busch InBev is hoping to pull SABMiller
Twenty-four hours after the news broke about a potential takeover of SABMiller by Anheuser-Busch InBev, and the wires are awash with commentary and analysts' notes. What would the new power couple of brewing mean for the industry and, more importantly, will the deal actually take place?
Bernstein's Trevor Stirling points out that under UK rules, ABI has 28 days to make a formal offer. And, although the pair are at the first-date stage, analysts are saying that a marriage is the likeliest outcome.
Stifel's Mark Swartzberg says the deal is "highly likely, since there are no natural competing bidders and SAB’s shareholders are institutional investors, the Santo Domingo family (14%), and Altria (27%), likely motivated by fair consideration [yesterday] and the prospect of equity participation in ABI."
Meanwhile, Nomura's Edward Mundy says there's no obvious saviour for SAB, but he believes the brewer won't give up without a fight. "We expect SABMiller’s recently-appointed heavyweight chairman, Jan du Plessis, to put up a strong bid defence; however, we struggle to identify an obvious white knight for SABMiller," he says. Indeed a Wall Street Journal article said any bid would likely be "well in excess of SABMiller’s Tuesday market capitalisation of US$75bn".
CLSA analysts don't believe SAB "will go willingly into ABI’s arms". Analyst Caroline Levy points out likely complexities, including the sale of US and potentially China businesses. "However," she says, "we believe the long-term benefits to ABI are transformational: SAB would complement its LatAm footprint, give it a leading presence in Africa, and provide a new cost structure to rationalise."
Our columnist Larry Nelson delves into the geographies, here.
In the absence of an obvious name for the merger, Bernstein's Stirling calls the potential brewing behemoth 'MegaBrew' - after all the merger would produce around 615m hectolitres of beer a year, according to Nelson. With deals - or potential deals - of this size, securing a return on investment may be slow-going. "We estimate that MegaBrew has a much slower economic payback than past ABI deals (six to eight years, compared to two for Anheuser-Busch) and is much more complex, both in terms of the number of parties involved and risks around the integration process," warns Stirling.
And all the while, where does yesterday's news leave Diageo, often linked to both ABI and SABMiller as a possible target. As they get to grips with their first-date nerves, ABI and SAB's courting probably means the heat is off Diageo in terms of takeover/merger talks. The Johnnie Walker and Smirnoff vodka producer may just get to sit at the bar and finish its drink in peace - for now, at least.
For just-drinks' full coverage of Anheuser-Busch InBev's approach for SABMiller, click here.
Anheuser-Busch InBev NV has an extensive strategic policy having just bought the American company SABMiller in 2015....
Anheuser-Busch InBev’s top domestic priorities in 2016 are to expand its premium beer offerings whilst elevating consumer sentiment towards core brands....
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