ABI takeout of SAB Miller could be 'transformative' for Molson Coors

The rumors arose once again when Heineken put out a statement reacting to press speculation on Sunday night, when it said it had consulted with its majority shareholder and concluded that a takeover proposal from SABMiller was 'non-actionable'.

"The Heineken family has informed SAB Miller, Heineken and Heineken Holding N.V. of its intention to preserve the heritage and identity of Heineken as an independent company," ​the brewer said.

"The Heineken family and Heineken N.V.'s management are confident that the Company will continue to deliver growth and shareholder value.​"

Heineken said it does not intend to make any further public statements in relation to this announcement.

ABI takeover of SAB Miller 70% likely​

Speculation arose in early summer​ that SAB (the world's second-largest brewer by sales volume) could make a play for Heineken (the world's third-largest brewer by sales volume) to head off an approach from world No.1 Anheuser Busch InBev (ABI).

In a note written yesterday, Vivien Azer from Cowen Research said an ABI/SAB merger and broader consolidation had been whispered about for years.

She said the Heineken news "provides an interesting twist, as it would seem that SAB Miller was seeking to block an acquisition by ABI by acquiring family controlled Heineken".​

With the family indicating that SAB's offer was non-actionable, Azer said Cowen predicted several outcomes, with a takeover of SAB by ABI the most likely since the latter has a history of hostile acquisitions.

"We ascribe a 70% probability to this outcome,"​ she writes, ​noting that if ABI were to bid for SAB then its market share leadership in the States would require it to divest SAB's 58% stake in Miller Coors.

What are the permutations as SAB struggles to retain independence?​

Nonethless, Azer writes SAB could still (1) raise its offer for Heineken (2) pursue a merger with Diageo (3) offer to acquire Carlsberg (4) acquire the remaining stake in Castle - "though [this is] likely not big enough to stave off an ABI bid".​

But if ABI were to takeover SAB Miller, Azer said Molson Coors would be in pole position to buy SAB's stake, with any deal as transformative as Constellation Brand's takeover of ABI's Mexican beer import business following the latter's Grupo Modelo takeover, which closed in June 2013.

"In 2013 the US accounted for 44% of sales and 48% of EBIT. Assuming a full consolidation of this business, the US would represent closer to 65% of sales and nearly 75% of EBIT,"​ Azer writes of Molson Coors.

"To be sure, like the Constellation Brands acquisition of Crown Imports, this deal would be transformational for Molson Coors, as it would notably increase their exposure to the world's most profitable beer market,"​ she added.