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Stars Align for Sep Volume Growth, +4% for 4 Wks, But AB+MC Shed 3+ $$ Share

In the beginning of Sep, cloudy overhang from subpar summer concerned some that season-ending Labor Day not so hot either. But latest Nielsen report suggests that by the 7th day, the holiday itself, Americans went back to buying more beer: volume +4.3% for 4 weeks thru Oct 3 in all-outlet + convenience channel. Above-premium segments got all the growth. Imports cranked up trend to +17%, near double speed of segment’s yr-to-date growth. Most of that’s Constellation: cases up 26% for 4 wks, now +15% YTD. Craft picked up pace too, +13% (vs +10% YTD), and super premium and FMBs kicked into higher gear, +11% and 16%, respectively, each near 10 pts faster than YTD trends. Only 2 segments slowed: cider up just 1% for 4 wks vs 16% YTD gain, and malt liquor.

So Sep looking like best month of 2015 so far. And it was good to most suppliers, all of which posted positive $$ gains for 4 wks. But 2 largest didn’t keep up with rest, lost combined 3.1 share of $$ for 4 wks: AB -1.9, MC -1.2. That’s well over a half-share pt steeper than combined YTD loss. Constellation gained almost half that, +1.4 share of $$. Pabst $$ share gain with NYFRB was +0.6. But no other top supplier moving the needle much: Boston, Heineken, DGUSA, Mike’s NAB, plus smaller importers all +/-0.1 share for 4 wks. Instead it’s “all other” US suppliers (mostly craft) who gained about 1+ share of $$.


ABI and SABMiller Agree in Principle to a Deal; 44 Is Magic Number; Extension

Megabrew is almost upon us, as biggest beer deal of all is agreed upon if not yet done, done. With deadline looming, Anheuser Busch InBev and SABMiller reached “agreement in principle” on a deal for 44 pounds per share cash, plus the partial share alternatives at 39.03 pounds. SABMiller’s board “would be prepared unanimously to recommend” the offer. ABI board “fully supports” offer but would “give its formal approval” just prior to deal announcement. So this deal “will happen” as one source said. Indeed, with SABMiller board unanimously recommending, likelihood of ultimately successfully consummating this deal has to be extremely high. This is not “a formal offer” under UK takeover law, rather just a “possible offer” as of today. The deadline for a “formal offer” has been extended to Oct 28. SABMiller stock is up 9% today, but still below 40 pounds. And before the market opens, Molson Coors stock is up almost 11% at press-time to all-time high. ABI stock is up 2%.

Creating a Colossus At about $106 billion, this will be by far the biggest beer deal of all time, and one of the biggest deals of any kind. ABI will reportedly be lining up $65-70 bil in debt, with Altria and Santo Domingo taking shares, as a precondition of the deal. Financing won’t be a problem, ABI cfo Felipe Dutra said on Oct 7 conference call.

Some Other Numbers in Deal; $3 Bil Breakup Fee; 15.7x EBITDA; Divestitures The magic number, 44 pounds, is a share price that represents a 50% premium to SABMiller’s “undisturbed” price on Sep 14 and the partial share alternative is a 33% premium. There is a $3 bil breakup fee “in the event that the transaction fails to close as a result of the failure to obtain regulatory clearances” or approval of ABI shareholders. The offer is “full but fair,” says Evercore ISI’s Robert Ottenstein. Implies blended multiple of 15.7x EBITDA, sez Robert.

ABI will of course have to divest the 58% of MillerCoors that SABMiller owns. And Molson Coors is the most likely acquirer. There will be other divestitures, regulatory hurdles, players yet to weigh in (Coke?), not to mention all the ripple effects and ramifications, both globally and in the US, that will emerge from what one source called an “earthquake” in the global beer biz. Stay tuned.