Anheuser Busch Inbev SA (ADR) (NYSE:BUD) said earlier this morning that it had approached SABMiller plc (ADR) (OTCMKTS:SBMRY) about a takeover, which could eventually create a brewing giant in the global beer market. The London-listed SABMiller said that its Board of Directors “will review and respond as appropriate to any proposal which might be made”, but clarified that no deal was certain yet and recommended its shareholders to “take no action”. AB InBey and SABMiller are the largest brewing companies in the world, so a potential combination would be subject to meticulous antitrust review. Following the announcement of this takeover approach, consumer analyst Vivien Azer, who joined Cowen’s Equity Research Department last year from Citigroup Inc (NYSE:C), believes that both Molson Coors Brewing Company (NYSE:TAP) and Altria Group Inc (NYSE:MO) are set to benefit from a potential AB InBey-SABMiller deal, and investors seem to agree.
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Going back to the possible deal, it is highly likely that U.S antitrust authorities would require the potential soon-to-be combination to divest some of its assets, according to The Wall Street Journal. AB InBey holds approximately 45% market share in the United States, while MillerCoors LLC, in which SABMiller owns an economic stake of 58%, holds roughly 25% of the market. Therefore, a potential deal would enable Molson Coors Brewing Company (NYSE:TAP), which owns the remaining 42% economic stake in MillerCoors, to acquire the aforementioned 58%. It is also worth mentioning that Molson Coors holds the right to boost its stake in MillerCoors to 50% if SABMiller is acquired. TAP shares have gained over 13% in today’s trading session, pushing them to a new all-time high.
Let’s now move on to the next beneficiary from th`e potential deal, Altria Group Inc (NYSE:MO), which currently owns 27% of the economic and voting interest of SABMiller plc (ADR) (OTCMKTS:SBMRY) and holds three board seats. As a result, the shares of Altria have gained 2.31% on the prospects of a premium bid for SABMiller. However, Vivien Azer believes that Altria’s gain from a potential deal is “highly dependent upon the deal structure (in particular in terms of the mix of ABI stock and cash, given MO’s low tax base on the stake”.
We will now take a quick look at the hedge funds’ sentiment on the two “indirect gainers” from a potential AB InBey-SABMiller deal. There were 66 hedge funds and other investors monitored by Insider Monkey that had positions in Molson Coors Brewing Company (NYSE:TAP) at the end of the second quarter, compared with 62 registered at the end of the previous quarter. Similarly, the value of these positions increased to $2.12 billion from $2.07 billion over the same time span. James Dinan’s York Capital Management represents the largest equity holder of Molson Coors within our database, holding 3.21 million shares as of June 30.
Moving on to Altria Group Inc (NYSE:MO), 43 hedge funds within our database held stakes in the company at the end of the most recent quarter, five less quarter-over-quarter. By the same token, the value of hedge funds’ investments in the stock shrank to $1.22 billion from $1.32 billion. Cliff Asness’ AQR Capital Management, one the 737 hedge funds observed by our team, boosted its stake in Altria by roughly 63% during the recent quarter, to 3.23 million shares.
To sum up, the market seems to believe that a potential deal between AB InBey and SABMiller will take place, given that the shares of the two companies have been pushed to higher levels today. To be more specific, the shares of Anheuser Busch Inbev SA (ADR) (NYSE:BUD) have gained more than 6% so far in today’s trading session, while SABMiller plc (ADR) (OTCMKTS:SBMRY)’s stock is nearly 20% in the green thus far. Given the 70% probability assigned by Vivien Azer that this deal will take place, Molson Coors and Altria Group stand poised to benefit from it in their own ways.
Disclosure: None
