Anheuser-Busch InBev has already briefed advisers about sale of Italian and Dutch SAB Miller brands, London-based Sunday Times reports.
Sales to appease competition regulators in Brussels before takeover of SAB Miller, Times says
Discussions of sale are in early stages; AB InBev, SAB Miller decline to comment, Times reports
Still at a very early stage in the process and this come as a surprise. Looking at the slides from the announcement and peroni appeared quite central to the strategy of the merged entity in Europe. This is clearly not a positive news and this should switch investor focus toward the execution risk for this transaction. As I have been arguing since the deal announcement the spread is way too tight given the execution risk and the spread should be trading in 15/17% discount range to reflect the multiple regulatory risk. I would expect a sharp drop tomorrow on the open and a trading range of 3700/3800 going forward reflecting the multiple risk to the transaction.
Looking at the table below of all the deals with a value greater than 20bn, clearly shows that the tighter than average spread of SAB Miller was unwarranted considering the risk and the future ongoing negative newsflow the situation will face for the coming months.
An initial drop to 15% would be my scenario, but I could see the spread moving toward the 20/25% level, a level where other challenged deals are trading at. Ultimately the risks faced by SAB Miller are not less than those of BHI / HAL, or the Healthcare Systems deals in the US. Sell SAB MILLER ahead of a negative newsflows in the coming Months.
|MEGADEALS > USD 20bn||SECTOR||Deal value||Spread||Spread Net||Spread|
|ALLERGAN PLC||PFIZER INC||Health Care||150,000||15.88%||15.84%||14.53%|
|BAKER HUGHES INC||HALLIBURTON CO||Energy||37,531||19.03%||18.86%||64.34%|
|BG GROUP PLC||ROYAL DUTCH SHELL PLC-A SHS||Energy||79,308||8.82%||8.71%||23.03%|
|BG GROUP PLC||ROYAL DUTCH SHELL PLC-B SHS||Energy||9.55%||9.45%||24.98%|
|BROADCOM CORP-CL A||AVAGO TECHNOLOGIES LTD||Information Technology||29,806||2.46%||2.49%||7.39%|
|BROADCOM CORP-CL A||AVAGO TECHNOLOGIES LTD||Information Technology||1.64%||1.67%||4.95%|
|BAXALTA INC||SHIRE PLC-ADR||Health Care||30,000||-0.44%||-0.35%||-0.59%|
|CHUBB CORP||ACE LTD||Financials||28,300||1.21%||1.15%||5.38%|
|CIGNA CORP||ANTHEM INC||Health Care||48,400||26.39%||26.14%||29.73%|
|EMC CORP/MA||VMWARE INC-CLASS A||Information Technology||67,000||21.10%||22.19%||33.05%|
|HUMANA INC||AETNA INC||Health Care||28,906||25.61%||25.67%||30.62%|
|PRECISION CASTPARTS CORP||BERKSHIRE HATHAWAY INC-CL B||Industrials||32,300||1.46%||1.42%||15.76%|
|SABMILLER PLC||ANHEUSER-BUSCH INBEV SA/NV||Consumer Staples||120,500||9.24%||11.15%||10.23%|
|TIME WARNER CABLE||CHARTER COMMUNICATION-A||Consumer Discretionary||79,250||8.65%||8.62%||34.57%|
|WILLIAMS COS INC||ENERGY TRANSFER EQUITY LP||Energy||48,000||1.04%||4.50%||9.78%|