SABMiller share price: Megabrew deal unlikely to have significant impact on competition in Europe

on Feb 3, 2016
Updated: Oct 21, 2019

The merger between AB InBev and SABMiller Plc (LON:SAB) is unlikely to have an immediate impact on competition in Europe’s beer market, as the combined entity will need time to realise its full potential, according to Moody’s.

“We don’t expect potential changes to competition to have much of a credit impact on Carlsberg and Heineken in the next 12-24 months, given the time it will take to close the ABI-SAB transaction, extract synergies and improve profitability in Europe, and to fully integrate SABMiller’s assets into those of ABI,” analysts at the rating agency said in a recent note to clients.
The ratings agency highlighted the planned sell-off of SABMiller assets in the UK, the Netherlands and Italy, saying that it would address potential competition issues in those markets. The two companies have “limited overlap” in other European markets, Moody’s points out.

The sell-off would also mean that the ABI-SAB combination would see its future growth mainly outside Europe. Moody’s estimates that the enlarged group would generate only nine percent of its total EBITDA in Europe after the sales. The agency also deemed it unlikely that the assets would be snapped up by European brewers.
In today’s trading, SABMiller shares were down 0.5 percent at 4,176.50p, as of 15:16 GMT. The stock has risen 2.6 percent since the start of the year and the company’s market capitalisation currently stands at just over £67 billion.
As of January 30, 2016, the consensus forecast amongst 27 polled investment analysts covering SABMiller had it that investors should hold their position in the company. The same consensus estimate has been maintained since November 13, 2015, when the sentiment of investment analysts deteriorated from “outperform”.
As of 15:59 GMT, Wednesday, 03 February, SABMiller plc share price is 4,176.00p.

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