June 22 (Bloomberg) -- SABMiller Plc, the world’s second- largest brewer by volume, dropped to the lowest level in three months in Johannesburg after Citigroup Inc. cut its recommendation on the stock.
The shares fell 1.1 percent to 228.90 rand by 11:29 a.m. in Johannesburg. A close at that level would be the lowest since March 22.
SABMiller was reduced to “hold” from “buy” by analysts including London-based Adam Spielman, according to an e-mailed note dated today. The price estimate on the brewer’s stock was cut to 23.50 pounds a share from 27 pounds. The company offered to buy Foster’s Group Ltd. for $10 billion in cash yesterday. The bid was immediately rejected by Australia’s largest brewer.
“The stock will be dead money for several months as the market waits for clarity about the Foster’s deal and assesses the likelihood of SABMiller being able to successfully grow the Foster’s business,” the analysts wrote. SABMiller will need to raise its offer of A$4.90 a share to more than A$5.50, they wrote.
“This isn’t financially attractive,” according to the analysts. “The decision to pay up for Australia shows there are few large attractive options left for SAB,” they wrote, adding that they “don’t like the dilution of the emerging-market story, nor the exposure to what we regard as the over-valued Australian dollar.”
--Editors: Ana Monteiro, Stephen Kirkland.
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