Credit Suisse Upgrades Diageo On 3G Capital Rumor; 'Any Bid Would Be Well Received By Investors'

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In a report published Monday, Credit Suisse analyst Nicolas Sochovsky upgraded the rating on
Diageo plcDEO
from Underperform to Neutral, with a price target of 1,800p, following speculations in the media regarding the company being in early stages of considering a bid from 3G. Diageo's ADRs rise 9 percent on Friday, following rumors of the potential acquisition. Given that high exposure of the company and low confidence in the management, the analyst believes that investors would welcome any bid for the company. "For 3G, aside from cost savings, the prize could be a higher multiple on the largest international spirits business in the world," Sochovsky said. According to the analyst's calculations, 3G would require about £40 billion in equity to fund the acquisition, prior to asset disposal, or £25 billion post disposal. According to the Credit Suisse report, Diageo's best defense is to replicate 3G's strategy, "nstil a zero based budgeting savings program, dispose of non spirits assets."
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Posted In: Analyst ColorUpgradesAnalyst RatingsCredit Suisse
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