AB-InBev + Coke: the heat is on
Good grief! Has Wall Street fallen prey to superstition, or are investors just desperate for a deal? At the end of January 2017 several business media reported that it was time for Jorge Paulo Lemann to get back in the hunt. Mr Lemann, 77, is one of the owners of 3G Capital, which also controls a large chunk of AB-InBev.
The billionaire has been doing blockbuster deals roughly every two years. In 2013, he persuaded the investor Warren Buffett to team up on H.J. Heinz. Then, in 2015, they orchestrated the USD 55 billion merger of Heinz and Kraft Foods.
“It’s logical (sic) that this would be the year,” said David Palmer, a food industry analyst at RBC Capital.
Whether it’s logical or not, the question of who Mr Lemann might go after in 2017 has just about everyone grasping for leads. Besides the snack company Mondelez (brands include Oreo and Cadbury), some other names include General Mills, Kellogg and Campbell Soup.
There is also renewed talk that Mr Buffett’s beloved Coca-Cola could be in play.
The focus on Coke as a sitting duck for AB-InBev was spurred by two independent developments. After a rocky eight-year run atop The Coca-Cola Company, Muhtar Kent, 64, will step down as CEO on 1 May this year and hand the task of reviving sales growth to his lieutenant James Quincey, 51, a Brit who has been with Coke for 20 years. Mr Kent will remain Chairman of the USD 180 billion company, Coke said.
Separately, it was announced that Mr Buffet’s eldest son, Howard, 62, who has sat on Coke’s board since 2010, will not stand for re-election in April. Incidentally, Mr Buffett’s vehicle Berkshire Hathaway owns 9 percent of Coke.
Although no one can know for sure what prompted Mr Buffett’s departure – reportedly he wants to spend more time running his foundation – the two events together are taken to mean that two major roadblocks towards a tie-up between Coke and AB-InBev are now out of the way. That’s according to Coke-watchers.
As recently as 2015, Warren Buffett said a deal was “very unlikely” because Coke wasn’t looking for one. What’s more, Mr Kent was initially resistant to much of the positive change at Coke, including a deal with AB-InBev, say Wall Street analysts.
Of course, the changes in Coke’s management do not immediately translate into a transaction. As some analysts said, Coca-Cola is scared of an acquisition by AB-InBev. So scared that when AB-InBev completed its acquisition of SABMiller, Coke used the change in control to trigger a clause in a contract it had with SABMiller to buy SABMiller’s stakes in Coke bottlers in Africa.
But if there is one thing that globalisation has taught us it’s this: Should the heavy-hitters among Wall Street investors want a deal they’ll get it.
