30th Jun 2014 13:52
LONDON (Alliance News) - Shares in Diageo PLC and SABMiller PLC rose Monday, on the back of speculation regarding a potential merger between the beverage giants, a deal which would create a drinks company worth roughly GBP101.6 billion at current market values.
In a report late on Friday The Financial Times said that a merger of the world?s number-one spirits firm and number-two brewing business ?would create a potent new force in the total beverage alcohol category,' citing analysts at Barclays.
Diageo shares were trading 1.4% higher Monday at 1,873.50 pence. SABMiller shares were up 0.8% at 3,391.50 pence. Both stocks were amongst the biggest gainers on the FTSE 100 Monday afternoon.
The FT article also suggested an alternative possibility; according to Citigroup analysts Belgium-based beverage and brewing giant Anheuser-Busch InBev could buy Diageo?s beer business as an alternate route into Africa, although it cited Citigroup analysts as saying that a bid for SABMiller would be the "best and most likely option."
AB InBev owns beer brands including Stella Artois, Budweiser and Beck's.
"We do not comment on rumour and speculation. As we have always said, we will consider opportunities if they are a good fit for our business, meet our strict investment criteria, and our future growth goals," a Diageo spokesperson told Alliance News on Monday.
SABMiller could not be immediately reached for comment.
Brewing giant SABMiller last month reported higher pretax profit for its last financial year, as it offset lower revenue by raising prices and expanding its portfolio of higher-margin premium brands.
The brewer of brands including Peroni, Pilsner Urquell and Grolsch said in May that strong growth in Latin America, Africa and Asia Pacific is still being partially offset by declines in Europe and North America.
It said that lager volumes were up, driven again by emerging markets like Latin America and China, but it took a revenue hit from currency movements.
Spirits and alcoholic beverage giant Diageo PLC in April reported another dip in sales in the third quarter, hit by weaker demand for its beverages and a hefty slowdown in Asia and other emerging markets.
Diageo said that the business has also been hit by currency movements, warning that current exchange rates would wipe around GBP330 million off of its operating profit for the year ending June 30.
In April, Diageo launched an offer to buy up to 26% more of India's United Spirits Ltd in a deal estimated to be valued at about USD1.9 billion. The offer is a second attempt by the spirits giant to grab a bigger stake in United Spirits, having lost out the first time after offering a price smaller than the company's share price. Diageo currently holds a 28.78% stake in United Spirits. If the current offer is successful, its holding will increase to 54.78%.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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