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TheStreet Open House

Anheuser-Busch InBev And SABMiller, Two Beer Companies To Watch

Stocks in this article: BUD STZ

Investor Concerns

Now what does this mean for investors? The pending transaction provides an opportunity to profit off the outcome. If you believe the deal will go through, going long on AB InBev now could be a smart move. If the deal goes through, AB InBev will have a clear path to dominate the Mexican beer market, which may significantly boost the firm’s bottom line. Also look out for Constellation Brands (STZ), which has fallen in the past week as well. Constellation, which currently distributes Modelo’s products in the US, would retain full rights to continue doing so after the merger and would be benefit greatly from a settlement.

SABMiller & King Enterprises

In a much less controversial deal, China Resources Snow Breweries, a joint-venture between SABMiller (OTC: SBMRY) and a Chinese government-backed corporation, purchased Guangdong-based Kingway Brewery Holdings for $851mm last Tuesday. SABMiller, the second-largest brewer in the world, has had a very successful history of acquiring companies in foreign markets and turning them around. Certain analysts, however, doubt the synergies of the acquisition and believe Snow Breweries overpaid for a failing company.

In the past couple of decades, the Chinese beverage market has been an interesting challenge for Western brewers; the country’s diversity, size and culture, paired with government regulation, have all proved to be significant barriers to entry to the largest beverage market in the world. SABMiller has spearheaded the trend of Western brewers attempting to break into the Chinese market and has done so successfully. SABMiller’s joint-venture produces Snow Beer, which is the leading beer by volume in China. If SABMiller is able to realize synergies and up its production with the merger, it could further solidify its position in the Chinese market. Make sure to keep a look out for SABMiller’s OTC-traded pink sheet as it attempts to integrate the new acquisition.

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