Bloomberg News

SABMiller Shares Surge on Report of AB InBev Takeover Talks

October 06, 2011

(Closes shares throughout and adds analyst comment in fifth paragraph.)

Oct. 6 (Bloomberg) -- SABMiller Plc, the world’s second- biggest brewer, advanced the most in almost three years in London trading after Brazilian news website IG reported that the beermaker is in talks to be bought by larger competitor Anheuser-Busch InBev NV.

The stock rose 7 percent, the steepest gain since Nov. 24, 2008. Guilherme Barros, a columnist at the Sao Paulo-based website, said a deal could be worth about $80 billion. He didn’t say how he obtained the information.

Nigel Fairbrass, a spokesman for London-based SABMiller, and Marianne Amssoms, a spokeswoman for Leuven, Belgium-based AB InBev, declined to comment on the report.

Analysts downplayed the speculation, saying such a deal would be contrary to recent guidance by AB InBev management. The Budweiser brewer is “the right size” and is focused on so- called organic growth, Chief Executive Officer Carlos Brito said in an interview with Dutch newspaper De Tijd in July. AB InBev, formed when InBev NV bought Anheuser-Busch Cos. in 2008 for $52 billion, had net debt of $40.1 billion as of June 30.

“We assign little probability” to an AB InBev acquisition of SABMiller, Pablo Zuanic, an analyst at Liberum Capital, said in a note today, adding that “market talk on the subject has been around for a while.”

Drinks Deals

AB InBev and SABMiller are among distillers and brewers who have expanded through acquisitions as well as organic growth. The former previously acquired AmBev, a leading Brazilian beer company, before taking over Anheuser-Busch. SABMiller agreed to buy Australia’s Foster’s Group Ltd. for about A$9.9 billion ($9.6 billion) on Sept. 21. Diageo Plc, the world’s biggest distiller, said in February that it was buying Mey Icki, adding Turkey’s largest maker of Raki liquor for about $2.1 billion.

SABMiller, the maker of Grolsch and Peroni, rose 147.5 pence to 2,247.5 pence as of the 4:35 p.m. close of trading in London, after reaching an intraday peak of 2,323 pence. That gives the company a market value of 35.7 billion pounds ($55 billion). AB InBev fell 17 cents, or 0.4 percent, to 39.46 euros in Brussels, after dropping as much as 2.3 percent.

“Raising $80 billion in such volatile markets seems a tough ask and such a strategic deal appears to contradict senior AB InBev management commentary,” Andy Smith, an analyst at MF Global in London, said today in an e-mail.

MillerCoors

SABMiller is “unlikely” to be bought by AB InBev because of the potential costs of exiting joint ventures and the price of a takeover, Trevor Stirling, an analyst at Sanford C. Bernstein in London, said in a March report.

Were AB InBev to acquire SABMiller, it would probably have to divest SABMiller’s stake in MillerCoors LLC, a joint venture with Molson Coors Brewing Co., and “take a haircut on fair value on the disposal,” Stirling wrote at the time.

SABMiller’s 49 percent stake in China Resources Snow Breweries Ltd., its Chinese joint venture, may present a similar issue, while a buyer could be liable to charges from any change of ownership of its 20 percent stake in Groupe Castel’s African beer business, according to the Bernstein analyst.

--Editors: Paul Jarvis, Robert Valpuesta

To contact the reporter on this story: Clementine Fletcher in London at cfletcher5@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net


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