Wednesday 16 September 2015

Top Tweets Today: 16/09/2015

SABMiller announced that it had received intention to submit a proposal on a possible merger between themselves and the world's largest brewer AB Inbev. Speculation had been around for years although no expressed actions had taken place prior to the announcement.

The price of SABMiller surged 25% on the London Stock Exchange on the release of the statement with some hoping the deal goes through which would likely rank a merger on this scale as one of the biggest ever done however there is a degree of skepticism around the deal.
It's clear from the pie chart above such a deal would afford both companies a huge chunk of the world beer market together with a 58 % share of the profits within the sector but not without a stiff resistance from regulatory and competition authorities. A deal this big would give give both companies significant clout to dominate the world beer market which I don't think governments or consumers would appreciate.

It was interesting to read the press statement which responded to speculation around the deal. The company said:

"The Board of SABMiller notes the recent press speculation and confirms that Anheuser-Busch InBev SA/NV (“ABInBev”) has informed SABMiller that it intends to make a proposal to acquire SABMiller. No proposal has yet been received and the Board of SABMiller has no further details about the terms of any such proposal. 

 The Board of SABMiller will review and respond as appropriate to any proposal which might be made. 

 There can be no certainty that an offer will be made or as to the terms on which any offer might be made. In the interim, shareholders are strongly advised to retain their shares and to take no action."

Reading between the lines it would seem SABMiller has become frustrated by AB Inbev's approach and expected a proposal on the table by now. If one recalls a similar rumour floated around the market almost exactly a year ago.

They've given them a month to come up with some sort of deal that the could consider but haven't raised much hope as at the same time those rumours swelled around last year SABMiller made a desperate bid for Heineken brewers in the hope of trying to starve off a takeover bid.


If one thinks about the strategic plans that need to be put on hold to ensure rumours such as these are true and are negotiated in the best interest of both management and shareholders one does understand where SABMiller is coming from. It would feel as if this has become an open invitation to AB Inbev to show their hand in what could be a significant takeover amount.

However there is scrutiny with some calling it corporate politics at play here. Andrew Todd gave his opinion that I found to be very valid, deals on this scale and at such a mature stage of a bull market could signal a top. Whatever it could be we will be following events closely.  




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