Analysis - SABMiller spurned by Heineken: The start of the endgame?
Anheuser-Busch InBev, start your engines
To many observers, the endgame for 'Mega Merger' began today. With SABMiller being outed for approaching Heineken about a takeover, the overwhelming feeling among analysts is that, with Heineken pooh-poohing SAB's overtures, Anheuser-Busch InBev has started the engines on its plan to buy the world's second largest brewer.
A Bloomberg report yesterday claimed that SABMiller and Heineken had met to discuss an offer from the former for the latter. With the cat out of the bag, Heineken released a statement overnight confirming the story while adding that it had rejected the offer.
What is surprising here is that Heineken was under no obligation to issue any statement on the matter. “The decision was made to pro-actively make it because we felt it was important to state that the proposal was not actionable and to clearly state the position of the Heineken family, our majority shareholder,” a spokesperson for the Amsterdam-headquartered brewer told me. “So, there is now no doubt in the public domain where we stand.”
The first that SAB heard of the statement, by the way, was when they read about it with the rest of us.
There can be little – if any – surprise that Heineken spurned SAB's offer: The former's complicated ownership structure gives the Heineken family the final say at times like these.
“In our view,” says Trevor Sterling at Bernstein today, “the Heineken family much prefers having effective complete control of the world's third largest brewer than being the second largest shareholder in a much larger entity, not to speak of the very strong emotional and governance links they still have to the company and the brand.”
And yet, the folk at SAB will have known that any move for Heineken was unlikely to get them anywhere, but proceeded all the same.
SAB's doomed approach is, according to most analysts, the brewer's attempt to block what has become the loudest whisper in the brewing industry, an offer from Anheuser-Busch InBev: 'Mega-Merger', if you will.
Following Heineken's statement, that whisper grew yet louder. “We continue to think A-B InBev would undertake exceptionally high deal complexity - scale, multi-currency financing, potentially divergent shareholder interests, strategic partnership risk/changes, antitrust reviews - if it bids for SABMiller,” says Mark Swartzberg at Stifel this afternoon.
“However, we also think A-B InBev management is skilled in all of these areas and that SABMiller's strategic appeal is high: Superior organic growth, higher geographic diversity especially toward emerging markets, increased scale and cost efficiency, increased cash flows/platform for future acquisitions.”
It is an analyst's wont to get carried away when it comes to M&A – witness the gleeful forecasts of a consolidation tsunami in spirits when Suntory bought Beam earlier this year.
In the meantime, however, with SAB on the hunt for a poison pill acquisition, we now all know how desperate they are. Rest assured, valuations will take that desperation into consideration.
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