SAB Shareholders Should Consider Offer say Analysts

Equity analysts have upgraded their fair value estimate for SAB Miller shares following potential takeover by Anheuser-Busch InBev

Philip Gorham 12 October, 2015 | 2:00PM

SABMiller (SAB) raised the stakes in its potential takeover by Anheuser-Busch InBev by doubling its cost-savings target to $1.05 billion in annual savings by 2020, up from its prior target of $500 million. We are raising our fair value estimate for wide-moat SABMiller to £39 from £36 as a result of this announcement and further movement in the GBP/USD exchange rate, but we continue to believe that the cash bid from AB InBev offers shareholders attractive value. As there is likely limited upside to the current offer, we recommend that SAB shareholders consider it carefully.

We retain our opinion that AB InBev's offer is attractive

This announcement indicates that our initial estimate of $1 billion in annual cost savings is too low. We now perceive significant upside to our initial estimate, because AB InBev can achieve cost synergies that SAB as a stand-alone business cannot, due to the duplication of some centralised and back-office functions across the two businesses.

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Philip Gorham  

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