Tuesday, January 13, 2015

Seeking Alpha: M&A Could Add Even More Pop To SABMiller

Given the importance of scale and exposure to emerging market growth for global consumer businesses, it seems like a "when, not if" type of question regarding SABMiller's (OTCPK:SBMRY) future involvement in M&A. The key question, though, is whether SABMiller continues to play the role of acquirer and consolidator, or whether the company (likely grudgingly) finds itself scooped up.

Arguably SABMiller doesn't need to concern itself overly much with M&A. The company generates 70% of its profits from emerging markets, the highest such percentage among the major brewers, and is weighed to the lowest per-capita consumption markets (meaning that it can expect to benefit from rising incomes/consumption). Not only that, SABMiller is one of the largest Coca-Cola (NYSE:KO) bottlers and stands to benefit from a new JV in Africa as well as further potential expansion.

With M&A likely to factor heavily in the company's future, a stand-alone valuation may be beside the point. That said, mid-single digit revenue growth and further incremental FCF margin potential do support the stock at this level, with M&A potentially adding revenue (if SABMiller buys) or margin synergy (if SABMiller is a seller) to the valuation.

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M&A Could Add Even More Pop To SABMiller

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