Will SABMiller buy Coca-Cola Amatil Ltd?
Shares of Coca-Cola Amatil Ltd (ASX: CCL) have rallied 18 cents, or 2.1% today to trade at $8.81, compared to a 1.3% lift for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
So What: Although the lift could partially be attributed to the general optimism in the market today, it could also be linked to reports that SABMiller, the world’s second-largest brewer, has been approached by its larger rival Anheuser-Busch InBev (AB InBev) regarding a potential takeover.
According to The Australian Financial Review, there has been speculation recently that SABMiller could be interested in acquiring Coca-Cola Amatil given the heavy fall in the Australian-based beverage manufacturer’s shares over the last two years.
An acquisition of Coca-Cola Amatil could also be a strategy to block a takeover by AB InBev’s given AB InBev’s relationship with Pepsi, which could create regulatory issues with the tie-up (more on regulatory hurdles in a moment).
Whether or not the speculation regarding SABMiller’s interest in Coca-Cola Amatil is accurate, the latest takeover assault from AB InBev could certainly add an element of urgency to these rumours.
Still, there is no certainty that a deal between SABMiller and AB InBev will proceed. To begin with, no formal offer has been made just yet with the AFR reporting that AB InBev wants to work with the board of SABMiller “toward a recommended transaction.”
Meanwhile, a tie-up between the two largest brewers would no doubt draw the attention of the regulators. A combination of the two would create one of the world’s biggest companies – dominant in Africa, Asia and America – with a value likely to be north of $320 billion. The company would also produce roughly a third of the world’s beer.
Now What: While it is possible that Coca-Cola Amatil could become a takeover target itself, investors shouldn’t invest in the company based solely on that reason. In saying that however, the company does appear to be trading at quite an attractive price and could be a good investment for investors focused on the long-term.
The smart money is looking for up-and-coming smaller companies with huge potential.
