Broker warns danger of SAB deal souring has been ‘overlooked’
THE £70bn takeover of FTSE 100 brewer SABMiller by rival Anheuser-Busch InBev could collapse if Britain votes to leave the European Union on June 23, a broker has warned.
In a bearish note, Bernstein analysts said they think investors have overlooked a key potential risk to the deal – a Brexit. Trevor Stirling, of Bernstein, cautioned: “We think there is a small but material risk that a Leave vote could lead to a sharp fall in sterling, which could eliminate the implied bid premium and possibly even lead to the collapse of the deal.”
While the pound enjoyed its best week in 10 months after referendum polls pointed to increased support for the Remain camp, Brexit fears have stoked sharp falls in the currency in recent months. The weakness in the pound has reduced the “relative attractiveness” of AB InBev’s £44bn cash offer, Bernstein said. If Britain votes to leave the EU and the pound devalued significantly enough for SAB’s share price to reach £44 or above, the broker said SAB’s board could face “a very tricky decision” and could retract its recommendation of the mega brew deal.
Mr Stirling said: “With no credible alternative bidder, the board would be implicitly relying on sterling to stay low.” Shares in SABMiller edged up 40p, or 1pc, to £42.50 by close.
On the wider market, London’s benchmark index bounced back from a Fedinspired sell-off after an oil price bounce lifted commodity-related stocks. The FTSE 100 index made gains of 102.97 points, or 1.7pc, to 6,156.32. Metal prices firmed after copper dipped to a threeweek low on Thursday, thanks to signs of increased demand in China. Anglo American jumped 3.6pc to 600.3p, Antofagasta added 2.4pc to 429p, Rio Tinto advanced 0.7pc to £19.53, BHP Billiton rose 0.4pc to 817.9p and Glencore edged up 0.4pc to 128.65p. Elsewhere, drinks bottler
Coca-Cola HBC was among the top risers after Citigroup upgraded the stock to “buy”. The investment bank believes concerns about a potential naira devaluation in Nigeria, fierce competition and rising sugar prices are already priced in. As a result it hiked its rating, as analysts think now is “a good opportunity to buy” as fundamentals are improving. The FTSE 100 stock jumped 6.2pc to £13.66. On the mid-cap index,
Ladbrokes touched a twomonth high, up 6.5pc to 127.3p, after the competition regulator said that the bookmaker and Gala Coral will have to sell around 350 to 400 shops to win clearance of their merger.
Centamin was also among the top mid-cap risers after Morgan Stanley began covering the stock with an “overweight” rating. The investment bank said shares were trading at a “steep discount” to its premium peers Fresnillo and Randgold. Shares soared 3.9pc to 112.1p. Meanwhile, asset manager
Aberdeen rose 2.3pc to 275.5p after chief executive Martin Gilbert told Bloomberg that he had received multiple expressions of interest from rivals in Europe and Australia.
Finally, shares in precision instrument maker Spectris fell 4.4pc to £16.93 on the back of softer-than-expected first-quarter results due to tough trading conditions in its North American and European markets.