Editor's Viewpoint - SABMiller and Diageo: A Tie-Up Too Far
If this year's Silly Season needs a start date, I'd say it is 27 June. The annual silent period that sees newspapers scrabbling around with space to fill began at the end of last week.
How do I know this?
Well, it was on Friday that reports broke suggesting a merger between Diageo and SABMiller was on the cards. The Financial Times noted Diageo's rising share price toward the end of the week, linking it to suggestions from Barclays that SABMiller could avoid a takeover attempt from Anheuser-Busch InBev by bunking up with the beer, spirits and wine behemoth.
“Diageo’s business has stalled over the last year and pressure on management to address investor concerns around slowing top-line growth rates is building,” Barclays was cited as saying by the FT. “A merger of the world’s number one spirits and number two brewing businesses would create a potent new force in the Total Beverage Alcohol category.”
Of course, there has been previous talk of Diageo and SABMiller teaming up: Do you remember 'Project Spice' back in 2007? The two were reported to be looking at Scottish & Newcastle and considering a carve-up that would see SAB buy S&N and then merge its UK assets with those of Diageo.
That didn't happen, and I'm confident that these latest reports won't happen, either.
While SAB may be keen to avoid A-B InBev's advances – if and when they are made – bunking up with Diageo seems if anything a touch drastic. And, for Diageo, deepening its relationship with beer beyond the Guinness brand and its African footprint will not generate the type of value it needs to keep its shareholders happy.
In short, this is a non-starter. Instead, we should all begin worrying about how long this year's Silly Season lasts.
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