What: Beer brewing giant Molson Coors (NYSE:TAP) saw its stock surge higher by 22% during the month of September, according to S&P Capital IQ data. The jump has pushed shares up by double digits so far in 2015, keeping investors solidly ahead of the broader market.
So what: September's pop had nothing to do with news involving Molson Coors' business operations. Instead, it was powered by merger activity elsewhere in the beer industry.
On September 16, SABMiller (NASDAQOTH:SBMRF), the second largest global beer company, confirmed that it is expecting to soon receive a formal buyout offer from its only bigger rival, Anheuser-Busch InBev (NYSE:BUD). Such a purchase could create a beer conglomerate approaching $300 billion in market capitalization. And while Molson Coors wasn't the target of this possible merger, its stock rose by the same amount as SABMiller's did.
There are three good reasons why InBev's shopping interest has Molson Coors investors feeling more optimistic. First, a purchase of this magnitude could push valuations up across the entire industry since InBev will likely offer a premium price for SABMiller. Second, it makes it more likely that Molson could be target of its own merger or acquisition attempt in the future. And third, beer industry consolidation could open the door for Molson to gain a dominant foothold in the U.S. market. SABMiller and Molson currently share ownership of a joint venture worth 27% of all beer sales in the United States. If SABMiller is bought, Molson might get the chance to acquire the 58% of the venture that it doesn't own.
Now what: Investors don't have any real information about the potential SABMiller acquisition. In fact, we don't even know for sure that a formal offer will happen. "No proposal has yet been received and the board of SABMiller has no further details about the terms of any such proposal," the company warned investors last month. In the meantime, InBev has until Oct. 14 to finalize and submit an offer, which means that investors can expect more volatility throughout the beer industry this month.