LEUVEN, Belgium -- Although Anheuser-Busch InBev NV has been in talks to acquire SABMiller Plc, the brewer also has its eye on other acquisition candidates, reported Bloomberg, including PepsiCo Inc. and The Coca-Cola Co.
Leuven, Belgium-based AB InBev and its advisers have long studied whether a merger with the $142 billion soda and snacks company makes strategic and financial sense, people familiar with the matter told the news agency; however, no talks are happening now, no deal is imminent and the scenario is among many it has looked at, one of the people added, asking not to be identified because the information is private.
AB InBev should think beyond the beer market, Albert Fried & Co. told Bloomberg.
A takeover of London-based SABMiller would be "boring," said Sachin Shah, a special-situations and merger-arbitrage strategist at Albert Fried. Regulators would likely force divestitures, and the cost savings from a combination wouldn't necessarily translate to increased value for shareholders, he said.
"Anheuser-Busch should become a drinks business, rather than just alcohol and beer," he said.
One driver for a takeover would be the potential cost and revenue benefits of selling beer and soft drinks through the same distribution system, said the report.
"From a strategic perspective, it doesn't strike me as too, too crazy," Ali Dibadj, an analyst at Sanford C. Bernstein & Co., told Bloomberg. "If you look at the strengths of ABI, they're very clearly around cost-cutting and distribution, particularly in a difficult volume environment like beer. I think those could be translated pretty directly to the Pepsi business in the North American marketplace."
Should AB InBev decide it doesn't want PepsiCo's snack business, it could sell it to one of the many buyers who would be interested in the maker of Lays potato chips and Quaker oatmeal, Dibadj said. The brewer hasn't shied away in the past from complex deals that involved divestitures.
Richard Withagen, an analyst at Kepler Cheuvreux, told the news agency that an option that might work for AB InBev is to buy Atlanta-based Coca-Cola Co. There are potentially more "levers to pull in terms of cost-cutting" than at PepsiCo, which has already been trimming expenses amid pressure from activist investor Nelson Peltz, according to the analyst.
Ian Shackleton, an analyst at Nomura Holdings Inc., told Bloomberg the more likely scenario would be that 3G Capital buys Coca-Cola with Warren Buffett, the soft-drink maker's largest shareholder and 3G Capital's partner on the more than $20 billion buyout of H.J. Heinz Co. last year. Then 3G Capital could sell the U.S. distribution business to AB InBev. "When you look at the Coke distribution system, arguably this is probably the best distribution system of any fast-moving consumer goods company in the world," he said. "Couldn't you actually use that system to distribute other stuff? Beer is a very obvious starting point."
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