Please ensure Javascript is enabled for purposes of website accessibility

David Gardner's Views on the Anheuser-Busch InBev/SABMiller plc Deal

By Motley Fool Staff and David Gardner - Jan 22, 2016 at 6:48PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

AB InBev has grown to become an incredibly successful company, and that probably won't change with its pending $100 billion acquisition of SABMiller.

Last year, the No. 1 and No. 2 breweries on the planet started moving toward what some might call a monopoly.

In this clip, David Gardner, Sean O'Reilly, and Vincent Shen talk about what might happen when AB InBev (BUD 0.84%) completes its buyout of SABMiller. They discuss who the megacompany might start targeting more aggressively, how regulatory pressure could affect it, and how well the company could do based on the past performance of its components. Also, The Motley Fool's co-founder talks about what makes the beer industry, and AB InBev, in particular, a fantastic long-term investment.

Listen to the full podcast by clicking here. A transcript follows the video.


This podcast was recorded on Jan. 19, 2016.

Sean O'Reilly: So, David, we've had a couple of shows about this situation, and I can't wait to get your thoughts. What do you think of AB InBev's move to buy SABMiller? It's a big company.

David Gardner: It is.

O'Reilly: And you usually don't go for big companies.

Gardner: That's true. The market cap of the company is just short of $200 billion. The reason I like and have recommended the stock wasn't that, Sean; it was just that I look backwards and see 100-plus years of a successful company, and really a few thousand years of commitment by the human race to beer. I look at a company today that has 17 $1 billion beers. 17 different channels for different types of beer at that kind of scale, and I just look for the next thousand years or so, which, I'm sorry to say, not all of us will be living during -- although, we are all living longer, and technology proceeds at pace.

O'Reilly: Fingers crossed.

Gardner: I just think it will be around forever. And I think it's a really successful company. And I don't really have a strong reaction or thought about Miller. Vince, what do you think?

Vincent Shen: Well, the issue there, and what we brought up last time when we talked about when this deal was first announced is, I guess, ultimately, what their position will be in terms of the regulatory environment, and the fact that, as David mentioned, they have so many of these huge brands -- combining that with SABMiller, which commands its own strength in certain markets that AB InBev wants access to.

When you have this massive conglomerate with that much concentration in terms of its market share and its dominance over the industry, what concessions are you going to have to make? What are they going to have to split off? It's going to be really interesting to see what, ultimately, if the deal goes through, that final entity looks like, where their strengths are, what brands they'll be able to hold on to.

O'Reilly: Yeah. The one key takeaway I remember from that show, Vince, was that we concluded that they're basically trading SABMiller's U.S.-based businesses for the growth markets of Africa and South America. Their economies are growing a lot faster, people's incomes are going up. And like David talked about, it's about the next 100 years, not the next five years.

Gardner: Certainly, there's always regulatory risk when you get that large. I always like to think about the companies that we're recommending in all of our services being stand-alones, and in most cases, not expecting them to need to merge, or hoping that a sugar daddy comes along, or there'll be some super-merger that causes this company to take over the world. So this is just a great company on its own. It's one of the lower-risk companies you can buy. In Motley Fool's Supernova, one thing we do is we put a risk-rating number on every one of our stocks, and it's a scale from 0 to 25. Lower is lower risk, to be simple. So 25 would be crazy, insane risk -- really a stock we'd never recommend. Apple is a five. AB InBev is a seven. That's a very low-risk stock.

O'Reilly: Did Apple win because of its huge bank account?

Gardner: That's definitely a factor. Our 25-point scale is basically 25 yes or no questions, and we ask the same question of every single company. And every single no is a plus one for risk. In other words, every number is riskier. So we only had seven numbers for that system. And I'll mention that, maybe, for a few other companies we talk about. But it just reminds me that this is a company that pays a solid, stable dividend, and, if you're a three-to-five-plus-year investor, the chance of you losing money on this investment is very low, in our opinion.

David Gardner has no position in any stocks mentioned. Sean O'Reilly has no position in any stocks mentioned. Vincent Shen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends Anheuser-Busch InBev NV. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Anheuser-Busch InBev SA/NV Stock Quote
Anheuser-Busch InBev SA/NV
$54.89 (0.84%) $0.46

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.