Seeking Alpha

Let's talk deal: Anheuser-Busch InBev and SABMiller

  • Talk about a merger between Anheuser-Busch InBev (BUD) and SABMiller (SBMRY) has picked up again this summer with many industry insiders forecasting a deal between the beer giants will be completed this year or in 2015.
  • The combination would create a beer juggernaut that would account for close to 30% of global beer volume.
  • Deal on: It's SABMiller's presence in Africa and China that makes it attractive to A-B with execs knowing SABMiller's stake in MillerCoors would very likely need to be sold off to make the deal fly with regulators. Some analysts note the growth channels are vibrant enough to justify the deal premium. Massive synergies on the cost side also help make the math work out.
  • Deal off: SA contributor Tim McAleenan thinks the massive amount of debt that A-B would have to take on to buy SABMiller puts a deal out of reach. Buying at a market peak is also a tricky proposition.
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Comments (11)
  • djkidm
    , contributor
    Comments (416) | Send Message
     
    30% of the world's shittiest beer, all in the hands of one company.

     

    Priceless...
    13 Jul, 10:31 AM Reply Like
  • chopchop0
    , contributor
    Comments (3535) | Send Message
     
    Yup.

     

    Long STZ and SAM. I'll pay up for quality, and I imagine many others will too.
    13 Jul, 11:01 AM Reply Like
  • deercreekvols
    , contributor
    Comments (5758) | Send Message
     
    If only Pabst was involved, then you would have a Trifecta!

     

    I will stick with Canadian beer for my fridge and MO for my portfolio.
    14 Jul, 03:06 PM Reply Like
  • dharmachakra
    , contributor
    Comments (30) | Send Message
     
    Ah,yes: filtered through Clydesdale kidneys!
    14 Jul, 04:34 PM Reply Like
  • Justin Jaynes
    , contributor
    Comments (3154) | Send Message
     
    Disclosure: Love Beer, no investments in Beer stocks -

     

    Why is STZ so much cheaper when looking at PE compared to SAM? - This is based on the 45 seconds of DD I just performed of the two companies, so may be a stupid question to those following these stories.
    14 Jul, 11:13 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (5031) | Send Message
     
    Indeed, anyone who knows about good beer buys craft beer and not cheap lager beer from these giants (aka yellow-colored water with no taste).

     

    It amazes me many people make a fuss about wine and food yet drink the worst and cheapest (lager) beer available.

     

    It will take time but i'm sure over time quality will become more important for beer. Good craft beer is gaining market share worldwide lately, you can see the vibrant global movement on sites like ratebeer.com with detailed rankings for each brewery.

     

    The giants have retail space/distribution contracts, huge marketing budgets and familiar brands to slow down the craft beer movement - but ultimately they won't be able to stop it.

     

    BUD and others can fight over the mass of low-quality beer drinkers in constant price wars...price remains the only differentiator (since all lager beer tastes the same and is virtually impossible to discern in blind tests).
    15 Jul, 04:27 AM Reply Like
  • TFCAB
    , contributor
    Comments (1977) | Send Message
     
    Nothing against Tim McAleenan, the 20 something SA Author who focuses on Dividend investing, but I doubt BUD is as concerned about the debt as he is.
    M&A across all industries is ramping up, not slowing down, and in most cases the stocks of the parties are trading at or near their high's.
    13 Jul, 11:15 AM Reply Like
  • 511southkstreet
    , contributor
    Comments (81) | Send Message
     
    Lets not forget that MO owns...I think 20% or something like that of Sab if i am not mistaken...Might be a nice little gain for them if it occurs.....:).
    13 Jul, 12:00 PM Reply Like
  • goaltender95
    , contributor
    Comments (14) | Send Message
     
    MO has a 27% stake in SABMiller

     

    Hoping MO continues increasing its branching off into wines and beer.
    13 Jul, 12:04 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1689) | Send Message
     
    Well, the stock might be at a high, but with interest rates being historically low, it's a good time to lock in some low interest debt. I guess it's a catch 22....low interest debt, but you have to take out a lot of it because asset values are so high due to the low rates.
    13 Jul, 12:49 PM Reply Like
  • jstratt
    , contributor
    Comments (2509) | Send Message
     
    My guess is that BUD would assume the existing debt of SAB and incur a split of stock and debt for for the equity.

     

    I think it can be done but I am unsure if it is a good move. SAB lost nearly 7% of its sales and trades at 27 PE while BUD 18 PE. Even with strong synergies and savings that seems a stretch.

     

    Plus it creates a mega entity for regulators and tax authorities to go after. The problem with taking over the beer world is you have to run it.
    14 Jul, 09:25 PM Reply Like
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