Shares in global brewer SABMiller (SAB) were up by more than 2.5% this morning on weekend reports that Brazilian investment giant 3G Capital was eyeing up a swoop for the UK-listed firm.
The link seems to fit. 3G Capital is thought to be looking for further investments in global fmcg firms after to add to its purchases of Burger King and Heinz. Furthermore, SABMiller looks in play, given its long-rumoured pursuit by ABInBev (ABI) and its own fruitless efforts to take over Heineken last year in what looked like a defensive action.
But the closer on looks at a potential 3G Capital bid, the more it looks like a reheat of the ABInBev rumour as 3G Capital already owns a 21% stake in the US/Belgian brewer.
3G is reported to be building a consortium to approach SABMiller, but that consortium would have to include ABInBev in some form given 3G’s significant shareholding in the latter. Therefore, any 3G bid would surely run into the same potential regulatory and logistical hurdles as a direct ABInBev approach.
Any entity involving the two brewers would be forced by regulators to sell SABMiller’s 58% stake in MillerCoors in the US and would be likely to have to shed brands in China and India too. There could also be monopoly issues in Russia and SAB’s core market of Africa too. Additionally, SABMiller has a growing relationship with Coca-Cola in Africa, while ABInBev has a significant relationship with PepsiCo.
Unpicking these issues doesn’t look to become any easier under a 3G Capital-led bid.
Additionally, SABMiller remains rather expensive looking. The rumoured £75bn value of the potential deal is over 30% above SABMiller’s current market cap and SAB’s shares have already risen by 27% over the past year on existing ABInBev takeover rumours.
More than just being expensive though, the fully-valued SABMiller doesn’t seem to fit in with 3G Capital’s usual modus operandi.
“The Brazilians historically have been value investors, buying under-managed assets cheaply and running them better,” Nomura analysts argued. “SABMiller does not appear to fit this criteria – it is a well-run asset with a high valuation.”
Merrill Lynch analysts were also left cold by the rumour. Dismissing it as “not new news”, the analysts added that the deal offered less obvious synergies for 3G than its previous deals in the food and drink sector.
In January, reports circulated that 3G Capital had raised $5bn to build its takeover war chest for its next major food and drink acquisition, with companies linked including Kellogg, Coca-Cola, Mondelez, McCormick, PepsiCo and Campbell Soup.