Report of buyout talks sends SABMiller up 10%

Report of buyout talks sends SABMiller up 10%

FMCG SUPPLIER NEWS

Oct 7th 2011, 08:20

SABMiller "unlikely" to be bought by AB InBev because of the potential cost of exiting joint ventures, and the price of a takeover according to London analyst. 

SABMiller ’s share price jumped as much as 10% yesterday to a record R286,98 after Brazilian news website IG reported that the brewer was in talks to be bought by larger rival Anheuser-Busch InBev.

SABMiller later retreated to close 3,76% higher at R270,17.

Guilherme Barros, a columnist at the website, said a deal could be worth about $80bn.

Nigel Fairbrass, a spokesman for London-based SABMiller, and Marianne Amssoms, a spokeswoman for AB InBev, declined to comment.

Analysts downplayed the speculation, saying such a deal would be contrary to recent guidance by AB InBev management. The Budweiser brewer is "the right size" and is focused on organic growth, CEO Carlos Brito said in an interview with Dutch newspaper De Tijd in July. AB InBev, formed when InBev bought Anheuser-Busch in 2008 for $52bn, had net debt of $40,1bn as of June 30. "Raising $80bn in such volatile markets seems a tough ask and such a strategic deal appears to contradict senior AB InBev management commentary," analyst Andy Smith of MF Global in London said yesterday.

SABMiller, the maker of Grolsch and Peroni, agreed to buy Australia’s Foster’s Group for about A$9,9bn on September 21.

SABMiller is "unlikely" to be bought by AB InBev because of the potential costs of exiting joint ventures and the price of a takeover, Trevor Stirling, an analyst at Sanford C Bernstein in London, said in a March report.

Were AB InBev to acquire SABMiller, it would probably have to divest SABMiller’s stake in MillerCoors, a joint venture with Molson Coors Brewing Company, and "take a haircut on fair value on the disposal", Mr Stirling wrote. SABMiller’s 49% stake in China Resources Snow Breweries may present a similar issue, he said.