Market Overview

Susquehanna: Diageo Chatter 'Just A Decoy,' Indicates Anheuser-Busch Near Next M&A Deal

Related BUD
Bubbly And Spirited: 2016's Alcohol Review Overflowing With Good News
Fox's Fake News And 6 Times Corporate Marketing Campaigns Went Wrong
Investors In Molson Coors Are Counting On Margin Expansion, Not Growth (Seeking Alpha)
Related DEO
Bubbly And Spirited: 2016's Alcohol Review Overflowing With Good News
A Look At How Well Sin Stocks Trade In Light Of José Cuervo IPO
Diageo goes ex-dividend tomorrow (Seeking Alpha)

In a report published Monday, Susquehanna analyst Pablo Zuanic maintained a Positive rating on Anheuser Busch Inbev SA (ADR) (NYSE: BUD).

In the report Susquehanna noted, "By industry, we rank the probability of the next AB InBev M&A target as follows: beer, soft drinks, liquor, coffee, food. So liquor is part of the conversation, but we see less opportunity for synergies with a liquor company than with other beer or soft drinks companies (drop sizes, frequency of delivery, supply chain savings), and given the relevance of investing and nurturing brands in liquor, we see the liquor industry further away from the AB InBev M.O."

Diageo plc (NYSE: DEO) would add 3 percent to AB InBev's US volumes, with 326 million liters of liquor for Diageo and 11 billion liters of beer for AB InBev in the US market. Moreover, regional overlap between AB InBev and Diageo is limited. However, AB InBev offering to purchase Diageo cannot be "ruled out…although it would not be our preferred target," analyst Pablo Zuanic said.

Zuanic believes that the speculations related to Diageo have been "generated" more to "encourage" the SABMiller plc (OTCMKTS: SBMRY) shareholders into a deal. "We have seen this before, with Anheuser-Busch shareholders…"scared" with news their likely buyer was going somewhere else. We see the same thing playing out here."

"With the SABMiller free float being over 50%, we think an offer from BUD with a 30-40% premium would be accepted (especially in the context of the Diageo chatter); the chatter surely gives the SAB free float holders more leverage over Altria and BevCo (the two largest holders of SAB shares). So we continue to assign a 75% probability to a BUD/SAB deal by year-end," Zuanic added.

Latest Ratings for BUD

Nov 2016InvestecDowngradesBuyHold
Oct 2016Societe GeneraleDowngradesBuyHold
Oct 2016Morgan StanleyAssumesOverweight

View More Analyst Ratings for BUD
View the Latest Analyst Ratings

Posted-In: SusquehannaAnalyst Color Reiteration Analyst Ratings


Related Articles (DEO + BUD)

View Comments and Join the Discussion!