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SABMiller bids for Heineken

Brewer SABMiller (SAB) has approached Heineken with a takeover offer - but how serious was it?
September 17, 2014

When Dutch brewer Heineken confirmed this week that it had been approached by its larger rival SABMiller (SAB) regarding a potential acquisition (which Heineken firmly rejected), it was shares in SAB which really got a boost. The reason was because SAB's offer has been widely interpreted as a last-ditch, defensive move intended to strengthen itself against a potential bid from the even mightier Anheuser-Busch InBev.

IC TIP: Sell at 3685p

Any such attempt by AB InBev would be extremely costly, but the world's largest brewer probably has the means to go through with it. Still, the likelihood of such a deal is anyone's guess. Analysts at Investec reckon if the takeover were to go ahead, AB InvBev might pay $70 (£42.96) a share for SAB, a 16 per cent premium to the current share price. That would be equivalent to an enterprise value to cash profits ratio of roughly 17 for 2015, far dearer than the average historical transaction multiple of 12x. Analyst Anthony Geard is sceptical of the benefits of such a deal and gives it a one-in-three chance of completion. However, other analysts are more upbeat about a combined SAB/InBev.

As for the chances of a SAB/Heineken tie-up, we don't give it much credence, given the huge costs, cultural differences and fiercely independent nature of Heineken.