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Blockbuster Brewery Merger Coming Up
A record $5 trillion jumbo bond offerings hit the books in 2015. Will 2016 be another record year?
Perhaps not, but if the proposed Anheuser-Busch takeover of SABMiller goes through, it will be the largest bond offering ever.
The $108 billion jumbo brewery offering will more than double the 2013 previous record bond deal of $49 billion by Verizon.
Please consider Blockbuster US Bond Offering Brews.
Mega-brewer Anheuser-Busch InBev has tested investor appetite for a potential blockbuster bond offering later this week, as the group lines up financing for its $108bn takeover of rival SABMiller.Budweiser, Miller Not Under Same Roof
Bankers in New York and London have been gauging investor interest in what could be a record breaking debt offering, potentially eclipsing the watershed $49bn issue completed by telecom provider Verizon in 2013.
The volume of so-called jumbo bonds, or more than $10bn in value, surged last year as a mergers and acquisitions boom drove companies to try to lock in cheap financing before the Federal Reserve raised interest rates from near-zero levels.
Investors have also preferred large bond deals as they increasingly fret about liquidity in the bond market and an inability to sell their portion of smaller issues without dramatically moving the price on offer downwards.
The LA Times reports Beer Merger will not bring Budweiser, Miller Under Same Roof.
The world's two biggest beer makers will join forces to create a company that produces almost a third of the world's beer. But in the U.S., the deal will not bring arch rivals Budweiser and Miller under the same roof.Record Breaking Bonds Deals
To ease concerns the brewing behemoth might get a stranglehold of the U.S. market, SABMiller will sell its 58% stake in a venture with fellow brewer Molson Coors for $12 billion. The deal includes rights to the Miller brand name and gives Molson Coors full control of operations.
The combined company — which as yet does not have a name — will also need to address regulatory issues in China, where SABMiller has a leading position with a 49% stake in the Chinese beer Snow. China is the focus of intense interest, as it already drinks a quarter of the world's beer.
The new company will be listed in Belgium, with secondary listings in Johannesburg, Mexico and New York.
The deal gives the new company 29% of the 198 billion liter global beer market — and makes it three times bigger than its nearest rival, Heineken, with a mere 9%, said Jeremy Cunnington, the senior alcoholic drinks analyst at Euromonitor International.
But to make the deal work, savings will need to be made. AB InBev expects to cut costs by $1.4 billion.
"AB InBev are second to none in being able to cut costs," Cunnington said. "And they are utterly ruthless."
Can the first $1 trillion bond offering be that far off?
Mike "Mish" Shedlock