Anheuser Busch Inbev SA (ADR) (NYSE:BUD) is really intent on acquiring SABMiller, but it appears that SABMiller is equally intent on remaining independent. SABMiller’s Board of Directors has rejected Anheuser-Busch InBev’s takeover offer for the third time in a month, complaining Anheuser’s offer was only modestly higher than its previous one. SABMiller refused an enhanced offer of approximately $104 billion. Let’s take a closer look at the proposed merger and examine hedge fund sentiment towards the company that produces ‘The King of Beers’.
In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8,000 funds in operation at present, hedge fund experts at Insider Monkey look at the aristocrats of this group, around 730 funds. Contrary to popular belief, Insider Monkey’s research revealed that hedge funds underperformed in recent years because of their short positions as well as the huge fees that they charge. Hedge funds managed to outperform the market on the long side of their portfolio. In fact, the 15 most popular small-cap stocks among hedge funds returned 118% since the end of August 2012 and beat the S&P 500 Index by 60 percentage points (see more details here).
According to a SABMiller press release, SABMiller’s board rejected Anheuser Busch Inbev SA (ADR) (NYSE:BUD)’s offer due to the fact that the proposals “very substantially undervalue SABMiller and its standalone prospects and growth potential”, that “the approach has been timed opportunistically to take advantage of SABMiller’s recently depressed share price”, that “the structure of the proposals, […] discriminates against the substantial proportion of SABMiller shareholders who may not be able to hold unlisted shares”, as well as “the highly conditional nature of the proposals, including significant regulatory hurdles in the U.S. and in China, on which AB InBev has not yet provided comfort to SABMiller.”
It is unclear whether Anheuser Busch will raise its offer yet again, but if it does, it may have to do so by October 14 because British law prevents Anheuser Busch from making another takeover offer for a period of six months after that date.
Follow Anheuser Busch Inbev Sa Nv (NYSE:BUD)
Follow Anheuser Busch Inbev Sa Nv (NYSE:BUD)
Not all is lost. Anheuser Busch has a big supporter inside SABMiller’s board in Altria, which owns 27% of SABMiller. Altria is in favor of the deal, which if consummated, would create the world’s largest beer company and give Anheuser Busch’s zero based-budgeting management more synergies to realize.
According to our data collected from around 730 elite funds, a total of 41 funds reported stakes in Anheuser Busch Inbev SA (ADR) (NYSE:BUD) worth $4.34 billion in the latest round of 13F filings, up from 38 funds and $4 billion respectively a quarter earlier. Seven of Anheuser Busch’s top ten elite fund shareholders increased their positions in the company in the second quarter. Eric W. Mandelblatt‘s Soroban Capital Partners increased its equity position by 28% to 7.45 million shares and raised its stake of call options by 25% to 5.57 million underlying shares. Tom Russo’s Gardner Russo & Gardner upped its holding by 1% to 5.21 million shares, while Doug Silverman and Alexander Klabin’s Senator Investment Group hiked its position by 50% to 3.0 million shares. Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC and J Kevin Kenny Jr’s Emerging Sovereign Group both increased their positions by 1%, to 2.10 million shares and 1.83 million shares, respectively. On the other hand, James Dinan’s York Capital Management decreased its stake by 16%, but still owned 2.28 million shares.
Analysts are divided on Anheuser Busch Inbev SA. Seven analysts have a ‘Buy’ rating on the stock, five have a ‘Sell’ rating, and six have a ‘Hold’ rating. Susquehanna has a ‘Buy’ rating with a $163 price target while Bank of America has a ‘Buy’ rating with a $132 price target. RBC Capital has a ‘Sector Perform’ rating with a $100 price target. Overall, analysts have a consensus price target of $129.64 per share, although their targets will likely come down if Anheuser Busch continues to offer more to pull off the acquisition of its resistant target.
Disclosure: None
