The time is now
While SABMiller is not a ‘textbook’ acquisition target for ABInBev, with a window of opportunity
presented courtesy of bond / fx markets, with no other large beer assets on the shelf and with the
company facing structural growth issues (cf. Volume detox, The Craft Invasion), our motto has
been ‘Now or Never’ with regard to the likelihood of the deal happening (cf. Deal detox). Following
yesterday’s announcements, is the time for this often-talked about deal finally now?
Much to ponder but we think the deal will go ahead…
There are many imponderables to keep us guessing over coming days, weeks and months.
Acquiring SABMiller would be anything but straightforward (it would be a huge deal, there are
many interested parties that need to be happy, cultural misfits, anti-trust issues….etc). Still, needs
must and we dare say that ABInBev has incorporated these factors into its thinking / sounded the
important parties out before approaching the SABMiller board.
…if ABInBev stumps up
If the SABMiller board is to recommend a deal, it will do so at a materially higher share price in our
view. Recent fx weakness should not cloud the compelling structural growth story that awaits
SABMiller in the medium to long-term. ABInBev are being shrewd opportunists yet again. Fair play
to them but after some toing and froing, we expect it will have to stump up for a takeout price in the
GBP40s (we upgrade our TP to GBP42.50). We keep SABMiller on an Outperform rating.
A potentially compelling investment, but there are too many unknowns right now
The combined entity would be a compelling investment proposition at the right price in our view,
(55% of the global beer profit pool, better diversification, fantastic pricing power...etc). However,
with ABInBev shares up 6% yesterday, many unknowns at play, likely poor value creation, the risk
of a dividend cut….etc, we see no rush to jump on board here. We keep ABInBev on a Neutral
rating for now.