What:Shares ofMolson Coors Brewing Company were up 13% as of 1:15 p.m. Wednesday after news Anheuser-Busch InBev approached SABMiller with a takeover offer. AB InBev and SABMiller were up 8% and 22% around 1:15 p.m.
So what:Specifically, SABMiller announced AB InBev "has informed SABMiller that it intends to make a proposal to acquire SABMiller." Any such proposal will likely value SABMiller significantly above its $75 billion market cap as of yesterday's close.
If you're wondering why Molson Coors is climbing, keep in mind in 2007, Molson Coors and SABMiller formed a joint venture called MillerCoors, of which Molson Coors currently owns a 42% stake. And as Cowen analyst Vivien Azer reminded this morning in a note to clients, "a change in control at SABMiller would allow TAP to acquire the 58% of the MillerCoors JV that is currently owned by SABMiller." According to Azer's calculations, between the joint venture's "healthy margins" and operating synergies, such a move would be approximately 14% accretive to Molson Coors.
Now what:Of course, there are no guarantees a deal of this size will come to fruition. But at the same time, such consolidation is hardly new in the global brewing industry, and this particular news doesn't come as a big surprise;The Wall Street Journal reported almost exactly one year ago that AB InBev was in talks with banks to secure financing for the acquisition. While I certainly wouldn't blame investors in any of the above three companies for taking at least some of today's quick gains off the table, the long-term benefits of the deal going through could also make it more than worth your while to hold on.
The article Why Molson Coors Brewing Company Stock Popped on Wednesday originally appeared on Fool.com.
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