Anheuser-Busch InBev (BUD, Financial) increased its offer to rival SABMiller PLC (LSE:SAB, Financial) on Tuesday. This is its latest addition in a series of deals with the company after an initial agreement was reached in November.
This deal has been affected by the United Kingdom's decision to leave the European Union and the resulting decline in the pound’s value since then. Anheuser-Busch has offered to pay £45 ($59) per share for SABMiller, increasing its previous offer by one pound.
Since the vote last month, several British companies have been bought by foreign companies. For instance, the Japanese company SoftBank Group Corp. (TSE:9984, Financial) acquired ARM Holdings (ARMH, Financial) and Chinese conglomerate Dalian Wanda (HKSE:03699, Financial) bought Odeon & UCI Cinema Group.
Great Britain has the fifth-largest economy in the world with a GDP of $2.8 trillion in 2015, making it an important trade partner not only for the EU but the U.S. as well.
Anheuser-Busch, a Belgian brewing company, has a market cap of $204.1 billion with an enterprise value of $249.1 billion. Its operating margin is 31.9%, well above the industry average of 9.35% and ranked higher than 93% of its competitors. It has a P/E of 26.7 with a forward P/E of 30. Its P/B is 4.8, and its P/S is 4.9. GuruFocus ranked its financial strength 5 of 10 and its profitability and growth 6 of 10.
Its British competitor, SABMiller, has a market cap of £71.2 billion with an enterprise value of £79.5 billion. The company’s operating margin is 17.38%, ranked above 72% of its competitors. It has a P/E of 39.8 with a forward P/E of 25.5. Its P/B is 4.5 and its P/S is 5.2. GuruFocus ranked its financial strength 5 of 10 and its profitability and growth 7 of 10.
A merger between Anheuser-Busch and SABMiller could create an industry giant, accounting for approximately 30% of global beer sales.
In regard to investors, the deal would allow them the option of accepting a cash-and-share alternative in which £4.66 would be paid in cash, with 0.48 in restricted shares for each share in SABMiller. The share alternative would be available to about 41% of SABMiller’s shares.
SABMiller said the revised offer was under consideration and confirmed the chairmen of both companies had met previously to discuss the “recent exchange rate volatility and market movements.” Anheuser-Busch said the offer was final and would not make any further considerations.
Disclaimer: I do not own stocks in any company mentioned.
Start a free 7-day trial of Premium Membership to GuruFocus.
