Investment Idea: Anheuser-Busch InBev (BUD, Financial) is a company with an excellent management team, good dividend yield, a fair price and a good catalyst for growth in the merger with SABMiller (SAB, Financial).
Anheuser-Busch InBev is a publicly traded company based in Leuven, Belgium. It is the world's leading producer of beer and one of the top five consumer products companies in the world.
This includes global brands such as Budweiser, Corona and Stella Artois, as well as international brands such as Beck, Leffe and Hoegaarden.
Market and Competition
Anheuser-Busch is the world leader in production compared to their peers as SABMiller, Heineken, Carlsberg and Molson Coors.
| 2014 Beer volumes (million hls) | ||||
| AB InBev | SAB MILLER | Heineken | Carlsberg | Molson Coors |
| 408 | 246 | 181 | 135 | 59 |
There are three main growth markets: microbrews, South Africa, and China. Anheuser-Busch is entering these markets by buying small craft brewers to pay close attention to quality, and is now seeking regulatory approval to buy SABMiller, which has significant assets in South Africa.
Merger
In October 2015, Anheuser-Busch InBev has agreed to buy its main rival SABMiller of £ 68 billion ($ 104 billion), creating a new company with sales of $ 55 billion.
SABMiller has a market share of 34% in Africa and has a joint venture called CR snow with China Resources Enterprise, which has a 23% volume leader in the beer market in the country.
The merger has some challenges. Together, Anheuser-Busch and SABMiller sold more than 30% of the beer in the world. To close the deal, Anheuser-Busch will have to obtain regulatory approval in many places, including the US, EU, China, South Africa, Colombia, Australia and India. Should the acquisition crumble, Anheuser-Busch would pay $ 3 billion for SABMiller.
In the US, SABMiller has a 58% stake in the joint venture MillerCoors LLC with Molson Coors Brewing Co., which is selling a Molson and Molson will agree with a market share of 25% and 45% AB InBev share.
Another challenge is potentially large in China, as Anheuser-Busch would be forced to sell the stake in SABMiller in a joint venture to produce snow with China Resources Enterprise Ltd.
In addition, while SABMiller is a key bottler Coca-Cola (KO) in Africa, Anheuser-Busch bottles PepsiCo beverages in Latin America, which is another possible conflict of interest.
If the merger is completed, the management could expand margins through its policies to reduce costs and economies of scale, growth in new markets, expand dividends, share buybacks and create value for shareholders.
Financial Health
Anheuser-Busch has $ 42 billion in net debt and generates $ 10 billion in free cash flow. The company paid $ 7.3 billion in dividends in 2014.
Performance
Two things make this company different and offers advantages over others. One is his trademark, scales, distribution and most importantly, its management team with 3G Capital and CEO Carlos Brito. The founders of 3G Capital partners are Jorge Paulo Lemann, Marcel Telles, Carlos Alberto Sicupira.
The story began in 1989 with the purchase of the manufacturer of the Brazilian beer Brahma.
Ten years later, Brahma merged with another Brazilian company called Antarctica and formed Anheuser-Busch.
In 2004, Interbrew and AmBev merged, creating the world's largest brewer, InBev.
In 2008, the merger of InBev and Anheuser-Busch, creating Anheuser-Busch InBev was completed.
This growth story was made possible by the original ideas of aggressive cost reduction, discipline and think big by 3G Capital.
Proceeds from shareholders
Anheuser-Busch has been growing its dividend payments since the merger in 2008 (figures are in billions of dollars):
| 2009 | 2010 | 2011 | 2012 | 2013 | 2014 |
| 1.3 | 1.9 | 3 | 3.6 | 6.2 | 7.4 |
Valuation
Used EV / EIBITDA - MAN. CAPEX * 1 tax rate. The price was $ 124, the market capitalization is $ 200 billion, plus net debt is equal to 242 EV.
The Ebitda is $ 18.4 billion. Its revenues have been growing by 5%, so D & A is used for man. capital spending $ 3.5 billion, with the tax rate at 17%, equivalent to $ 12.4 billion.
The earnings multiple of 19.5 is fair or a little cheaper when compared to Coca Cola and Procter & Gamble (PG).
But most important is its dividend yield of 3.2%, which could significantly increase considering the merger, the new growth markets and cost reduction. I think this is a company you could ever have to enjoy dividend growth and the ability of management to create value for shareholders.
Risks
The risk is that if the operation is not carried out, the company could have trouble finding markets for growth. Otherwise, the buyer of these shares will own a quality company with high returns on capital, good dividend yield and the best management team.
