Growth in emerging economies, cost savings and complimentary geographies are some of the reasons he puts the chances of a tie-up between AB and InBev in the next two years at 70%. But there is also AB’s thirst to reclaim a leading position in the global beer market.
Mr. Morrisey is proposing a joint venture structure that would allow management to control part of their respective companies, while still capitalizing on the combination. Both brewers have market caps in the US$38-billion range.
He upgraded AB from a "sell" to a “hold” and boosted his price target by US$4 to US$52. InBev moved up to a “buy” from a “hold.” While AB’s variety of initiatives create “significant executive risk,” a combination with InBev would generate value, Mr. Morrisey told clients in a note.
He also upgraded SABMiller to a “buy,” saying it is being turned around and has under-appreciated assets in Latin America, China, Africa and India. It too has been the subject of merger rumors involving Heineken NV, while Carlsberg A/S and Scottish & Newcastle Plc are considered another potential team.
