E-Malt.com News article: World: Diageo named as one of the targets for AB InBev’s or SABMiller’s acquisitions

Diageo bounced off a seven-week low on June 27 as theories revived that it might be a poison pill for SABMiller, the Financial Times reported.

SAB has climbed in recent weeks on growing speculation that fellow brewer AB InBev has been examining a bid. The latest idea was that SAB might stymie AB InBev’s interest by pursuing a relatively straightforward merger with Diageo, which would also give it access to the Guinness beer business.

Combining Diageo and SABMiller would create a £100 bln business generating annual free cash flow before dividends of about £5 bln, Barclays forecast. It estimated cost savings of £430 mln on top of synergies from using SAB’s global beer distribution network.

“Diageo’s business has stalled over the last year and pressure on management to address investor concerns around slowing top-line growth rates is building,” said Barclays. “A merger of the world’s number one spirits and number two brewing businesses would create a potent new force in the Total Beverage Alcohol (TBA) category.”

Diageo is said to have looked at combining with SAB in the past, including in 2007 when the groups weighed a carve-up of Scottish & Newcastle.

Another possibility, according to Citigroup, would be for AB InBev to buy Diageo’s beer business as an alternate route into Africa. It expected AB InBev to make its move in the next six to 18 months, with a bid for SAB “the best and most likely option.”


02 July, 2014