Brexit is not expected to derail blockbuster beer deal
Shareholders of brewer SABMiller might want more out of the proposed takeover by Anheuser-Busch InBev because of England's vote to leave the European Union. Edward Jones' equity research analyst Brittany Weissman says that is a remote possibility as the acquisition closes in on regulatory approval in the U.S. and a few other countries.
“The deal is less attractive than it was originally,” says Weissman.
“It used to be an over 100-billion dollar deal, now it's slightly below 100-billion dollars."
The lesser value is attributed to a decline in some global currencies, especially in England, following the Brexit vote, but Weissman does not think it’s enough to derail the deal.
“The worst impact it probably has for most companies is translation of currencies in bringing those foreign dollars back to U.S. dollars,” she tells St. Louis Public Radio.
In theory, the shareholders could want a little bit more money. We still think that's unlikely.
“But otherwise, the day-to-day operations of this company and most companies are going to be the same."
One of the reasons the deal is still expected to go through, even though SABMiller is based in London, is that the finish line for international regulatory approvals is in sight.
The U.S. is expected to sign-off on the deal within the next month and it will join these jurisdictions in approving the combination:
- South Korea
- South Africa
- The European Union (which includes 28 countries)
- Approval in Ecuador is subject to certain conditions
Source: Anheuser-Busch InBev
Analysts also say the Brexit result doesn’t impact any of the fundamentals.
“Nothing’s changed on the reasoning behind the deal,” says Weissman.
“BUD wanted SABMiller for its emerging market exposure. The emerging markets are where they want to be.”
AB InBev regards those markets as the key to company growth, and Weissman adds there is a $3 million breakup fee if the transaction falls apart.
“At the end of the day, AB InBev needs this deal to go through.”
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