Anheuser-Busch Almost Over All Acquisition Approval Hurdles

Courtesy of Benzinga.

CLSA analysts Caroline Levy and Brian Doyle think Anheuser Busch Inbev SA (ADR) (NYSE: BUD) has almost completed all acquisition approval hurdles. The brokerage maintains its Outperform rating and $142 price target on the shares of the company.

The analysts pointed out that Anheuser Busch received its SABMiller (SABMiller plc (ADR) (OTC: SBMRY)) deal approved by the European Union. This was critical for the deal to close, as it was one of the four regulatory approvals mentioned as pre-conditions on May 24. However, while the deal has received the approval in South Africa’s Competition Commission, it has yet to receive it from the key Competition Tribunal.

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While pointing out that China and America have yet to pronounce their ruling, CLSA expects the company to receive all approvals “in time,” so that the transaction could be closed in the second half of the current year.

The brokerage also expects the company to suffer a loss of $9.0 billion due to the Brexit effect on the currency. However, Anheuser Busch hedged the purchase price currency exposure of GBP 45 billion from SABMiller cash offer. “Of that $9.0 billion loss, about 65 percent is going straight to the balance sheet, with the remainder flowing through ABI’s income statement: $688 million in 4Q15, $599 million in 1Q16, and we estimate about $1.5 billion in 2Q. These charges are in non-recurring finance costs, which (unlike the SAB-related interest expense) are excluded from adjusted EPS,” the analysts said.

The two analysts also cited one more aspect of the pound’s move: “Partial Share Alternative (PSA) for SAB, intended for only Altria and BevCo, is now worth GBP48.23, a 10 percent premium to the cash offer price of GBP44.”

At time of writing, Anheuser Busch was up 4.23 percent on the day, trading at $131.64.

Posted-In: Brian Doyle Caroline Levy CLSAPrice Target Reiteration M&A Analyst Ratings