Crowding out the big brewers
The prospective £60bnplus bid by Anheuser-Busch InBev for Peroni-owner SABMiller is the kind of deal that has investment bankers and the City’s leading international law firms salivating.
It comes with promises of fat advisory fees, legal charges for sorting out competition issues and a relatively uncomplicated share register at the target firm.
Instead of having to convince dozens of investors of the value to be extracted from a deal that would create a brewing behemoth straddling earth, the Brazilian chief executive of deal-hungry AB InBev, Carlos Brito, mainly has to convince two dominant investors — US tobacco group Altria and Colombia’s super- rich Santo Domingo family. It will then have 41pc of the stock in its back pocket.
As for the British drinker in the Pig & Whistle, the coming together of these brewing giants is unlikely to make any immediate difference. But like all big mergers, the aftertaste could be bitter. Both AB InBev and SABMiller are already formidable profit- making machines and a merger of the two brewers can only improve their pricing power vis-à-vis the pub trade where ownership is far more dispersed both in the UK and overseas. The biggest competition challenge will be in the US where the competition authorities will not look favourably at an ‘ABSAB’ deal which would bring together two large-scale American brewers Anheuser-Busch and MillerCoors (in which SABMiller has a 50pc stake).
AB InBev began as Belgian brewer Stella Artois before the merger with Budweiser six years ago. The latest would give it a chunk of the African market where SABMiller generates 29pc of its revenue. Whether AB InBev would be welcomed in Africa is another question. SABMiller is one of those South African émigré firms that has chosen the more liquid markets of London over Johannesburg. Nevertheless, the company has been part of a major push to improve drinking habits and environs in the black suburbs and townships of South Africa. It would be a social tragedy if in the interests of cost savings, after a mammoth merger, some of that sensitivity were to be lost.
A deal of this scale would certainly see some brands and territories come up for grabs and Diageo among others will doubtless be watching.
Big mergers are largely about financial engineering rather than the workforce and the consumer. The reality is that, in the more sophisticated markets – such as the UK and the United States – brewing has moved onto a post-big beerage era. The silent revolution is the rise of craft beer with names such as Sierra Nevada (California), Camden Pale Ale (London), Stiff Upper Lip (London) and Goldeneye Pale Ale (Scotland) all going great guns.
Many craft brewers have used ‘crowd funding’ to expand, exploiting the new wave of financing that has developed since the financial crisis. This is a world away from Brazilian private equity colossus 3G, the monetary power behind AB InBev. It partly explains why unimaginative mass-market brewers see scale as the best way forward.
Small byte
AS a major chip supplier to Apple there have been high hopes that Imagination Technologies (which I hold) might have the wherewithal to break through the glass ceiling affecting British tech.
But it has struggled to keep up with the speed of change in the industry despite having Apple as a cornerstone shareholder with 8.44pc of the stock. The result has been a rollercoaster ride for investors who saw the shares saw to 717p in 2012 before collapsing, along with earnings, to 159p last year. This year has seen something of a revival on hopes for newly designed chips for communication and core processing.
But the fear is that it is losing ground to its bigger UK rival ArM holdings. It is also a bit disappointing that it has not quite managed to be the dominant player in the digital radio market, having rolled out the Pure brand ahead of less nimble footed competitors. Chief executive Sir hossein Yassaie blames a disappointing first half, that sent shares plummeting, on slowing growth in China and other emerging markets.
Funny that, as Apple itself has so far been impervious to cold winds sweeping out of Asia.
Austerity myths
The fantasy world of ‘austerity’, inhabited by Jeremy Corbyn, Nicola Sturgeon and Green Party leader Natalie Bennett, looks more threadbare with every data set.
Latest unemployment figures showing the jobless rate dropping to a post-crisis low of 5.5pc and a rise in employment of 42,000 gives lie to the claims that there are not jobs for people coming off welfare. Similarly, a real rise of 2.9pc in earnings, after inflation, ought to be a real boost to family income.
As for the idea of People’s Money Printing, advocated by Labour’s new economic comrades, that was effectively knocked out of the park by Bank of england Governor Mark Carney. he cautioned that such a policy could be inflationary and that hurts the poor and elderly the most.
Thank goodness for the Old Lady’s independence of thought and action.