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AB InBev close to sealing SABMiller takeover financing

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Mr Dudding owns shares in Anheuser Busch InBev the brewer behind Budweiser

Shares of Molson Coors Brewing Company (TAP - Analyst Report) hit a new 52-week high of $84.52 on September18, following rumors of a "big beer merger" between Belgium-based Anheuser Busch (BUD - Snapshot Report) and SABMiller (SBMRY - Snapshot Report) based in London. Previously, after AB InBev's purchase of Grupo Modelo (GM), it pacified the regulators by selling GM's American beer business for $4.75bn.

The stock had a trading volume of 1,360,089 shares. And it is probable a lot will depend on the structuring of the deal as to whether any firm offer gets an SAB Miller board recommendation.

SAB issued a statement to note press speculation about a takeover and acknowledge AB-InBev's inquiry. However, in the situation that the AB InBev takeover does come through, Diageo may have to ramp up their rate of innovation in the region along with offering more competitive prices to avoid losing market share.

"Our culture is focused on Latin America and Asia".

AB InBev's merger with SABMiller looks attractive, for at least three reasons: sales growth, global reach and cost saving synergies.

There are funding complications, too. Anheuser-Busch InBev has approached its rival SABMiller about a merger.

Revenues between CY 2009 and CY 2014
Revenues between CY 2009 and CY 2014

"It is likely there would be multi-billion-dollar proceeds from asset divestments that antitrust authorities could impose in the USand China, and scope for steady deleveraging thanks to solid free cash flow, both of which would help the credit profile", Fitch wrote.

SABMiller is the second largest brewing company in the world and one of the world's largest bottlers of Coca-Cola drinks. In the USA, SAB has a 58pc stake in the MillerCoors operation, whose chief brand is Coors Light with a 30 per cent share of the United Statesbeer market. Firstly, global beer sales have grown gradually over the past few years.

Meanwhile, AB InBev has distribution agreements with PepsiCo in Latin America, including the exclusive right to bottle, sell and distribute certain Pepsi brands in Brazil.

 

Nearly everything about the potential merger of Anheuser-Busch InBev (BUD) and SABMiller, the world's two largest brewers, would be enormous, including the regulatory risks. Given that the addition of SABMiller to AB InBev's umbrella is going to literally complete the latter by bringing in untapped markets across Africa and South America, along with bringing the combined market share in key markets such as the U.S.to over 70%, might make it almostimpossible for other players in the beer space to compete. The Company markets, creates, distributes and sells a portfolio of around 200 beer and other malt drink brands.

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