SABMiller soars on megamerger talk

SABMiller's Chief Executive Graham Mackay.

SABMiller's Chief Executive Graham Mackay.

Published Oct 7, 2011

Share

The SABMiller share price surged R27 to a high of R287 in intraday trade yesterday following reports from a Brazilian news website that the company’s executives were in talks with Anheuser-Busch InBev about a merger deal that would be valued at about $80 billion (R640bn). During the afternoon the shares eased back to close 3.76 percent firmer at R270.17.

Both SABMiller and AB InBev declined to comment on the report. Several analysts told Business Report that given the extent of the share price’s surge, whether it wanted to or not, SABMiller would be obliged to issue a statement if it was involved in any talks.

“It takes its announcement obligations very seriously,” one analyst remarked.

Speculation about a possible deal between AB InBev, the largest beer group in the world, and SABMiller, the second largest, have surfaced regularly during the past two years but never before has it caused such a big price hike. The timing of the Brazilian report and the extent of the price increase took most SABMiller watchers by surprise as the group is currently in the process of trying to finalise its $9bn bid for Australian beer group Foster’s.

Chris Gilmour from Absa Asset Management told Business Report yesterday that the timing did not seem right and that while a tie-up between the two groups was a possibility, it was not expected to happen for a couple of years. He noted that there had been speculation that part of the motivation for the Foster’s acquisition was the desire to “bulk up” in the face of an approach from AB InBev.

During a recent conference call with analysts, SABMiller chief executive Graham Mackay said such a strategy would only delay any move by AB InBev by a couple of years.

That speculation of a megamerger continues in the face of what are generally regarded as uncertain benefits from such a deal reflects the ongoing consolidation that has characterised the industry for over 15 years. Analysts have said that the only certain beneficiary would be the corporate advisers and funders involved.

However, according to one leading analyst, the merger would have significant benefits for SABMiller executives. In a report issued earlier this year Trevor Stirling of London-based Bernstein Research said that if the deal was struck at an appropriate price the SABMiller management stood to share about £650 million (R8bn) as their share options vest. - Ann Crotty

Related Topics: