The first $100 billion-plus deal of 2015 is here.
Anheuser-Busch InBev NV’s proposal to pay almost $106 billion for SABMiller Plc, the biggest acquisition by far in 2015, pushes global deal volume to $3.2 trillion this year. Including debt, as all the following charts do, the transaction value rises to $120.1 billion, according to data compiled by Bloomberg.
As huge as the transaction is, with almost a dozen banks lined up to provide financing of as much as $70 billion, it’s not close to being the biggest ever. That honor goes to AOL’s doomed merger with Time Warner 15 years ago – a tie-up that ended in a spinoff in 2009.
If Megabrew – as a combination of the world’s two biggest brewers is often called – can make it past antitrust regulators around the world, it will top the ranks of takeovers of U.K.- listed companies. Though SABMiller traces its history back to the Johannesburg gold rush of 1886, it sold shares in London in 1999 and has its official headquarters in the city’s Mayfair district.
The deal will bump Royal Dutch Shell Plc down the list. The oil giant’s 2004 acquisition of Shell Transport & Trading Co. will now rank second, while its takeover this year of BG Group Plc is third. The only transaction that would have topped AB InBev’s bid for SABMiller was Pfizer Inc.’s $124 billion pursuit of AstraZeneca Plc. That process was eventually abandoned after the two pharmaceutical companies failed to agree on price. The merger also faced controversy because it would let a U.S. acquirer shift its address to the U.K. to lower its effective tax rate.
Tuesday’s agreement also marks a comeback for consumer deals. Transactions in noncyclical consumer industries – including beverages, food, health care and pharmaceuticals – make up more than a quarter of all M&A this year, with a total value of $735.4 billion. That compares with $570.7 billion last year, when financial deals dominated.
The shift means that well-known household names are returning to the market. H.J. Heinz’s Berkshire Hathaway Inc.- backed acquisition of Kraft Foods Group Inc. added $55.4 billion to the total, while the creation of Coca-Cola European Partners Plc, combining three soda bottlers across Europe, was worth another $11.5 billion.
So will AB InBev and SABMiller’s biggest shareholders, who’ve been jostling for weeks over the price of the deal, be happy with the outcome? Post-acquisition, shareholders’ return on the biggest deals can be a mixed bag. In the five years after making an acquisition bigger than $50 billion, parent companies’ shares declined by a median of 12 percent, according to a sample of data from 22 transactions compiled by Bloomberg.
The standout from the loser column is also the biggest: Time Warner’s 2001 merger with AOL. The deal unraveled when the Internet company was spun off in 2009, but not before Time Warner’s shares fell 62 percent in the five years after closing. Still, Megabrew has history on its side. InBev NV’s 2008 takeover of Anheuser-Busch was followed by a 326 percent jump in the shares through 2013, according to the data.