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AB InBev Moves Closer to Sealing SABMiller Deal

The asset swap with Ambev should be beneficial to moats and margins.

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 Anheuser-Busch InBev (BUD)/(ABI) answered one of the final outstanding questions regarding its acquisition of  SABMiller (SBMRY)/(SAB) with the announcement that it will enter into an asset swap with  Ambev (ABEV)/(ABEV3) to distribute SAB's Latin American assets. Subject to the closure of the transaction, AB InBev will transfer SAB's Panamanian business to Ambev; in exchange, Ambev will transfer to AB InBev its businesses in Colombia, Peru, and Ecuador.

This distribution of the Latin American businesses across the two firms is something of a surprise to us. We had expected SABMiller's Latin American business to be transferred in its entirety to Ambev, with AB InBev taking a higher equity stake in Ambev. Nevertheless, we believe this asset swap is neutral to our valuation and our wide economic moat rating for AB InBev, which is ultimately left with monopolistic control over some growing and premiumizing Latin American markets. We are reiterating our $126 and EUR 111 fair value estimates for AB InBev's ADRs and ordinary shares, respectively, as well as our $5 and BRL 20 fair value estimates for Ambev.

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Philip Gorham does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.