Now that Anheuser-Busch (BUD) has been swallowed by InBev, a company half its size, people may be looking for a new beer (or beer stock).
Deutsche Bank says those people should try Molson Coors (TAP). It may not be the All-American BUD, but America + America Jr. (Canada) with a little South Africa mixed in via the MillerCoors joint venture will have to do the trick.
Specifically, DB loves the MillerCoors merger:
We view MillerCoors as an unparalleled value creation opportunity:
MillerCoors presents integration profit opportunities at every level such that we think besting initial $500 million synergy target is likely. Short‐term, integration results may be uneven, but higher input pressures makes such a transformative deal very timely.
A stronger No. 2 domestic player might emerge…eventually:
MillerCoors is 3/5 the size of AB, at 31% domestic share. The enterprise has a material brand overlap issue with no obvious solution (Coors Light and Miller Lite), but a stronger collective portfolio. As it parses brands, we see opportunities amidst change. Marrying cultures and management will be somewhat harder. Other major hurdles will be pricing strategy (both regionally and at point of sale) and supply chain integration. We respect Leo Kiely’s capabilities and track record, but marrying competitors in the same geography is not the same as latching together US and Canadian
businesses. The road could be bumpy.
Cost saving opportunity exceeds targeted $500 million:
Cost savings opportunities within every facet of manufacture, distribution, procurement, marketing, IT, sales and back office are manifest, and the real hook. Run‐rate target of $500mn savings equates to 50% of pro‐forma EBITDA, $4bn in NPV. We believe besting this target – especially in a higher cost environment – is likely. Each $50 million incremental savings drives $1 share of value to TAP.
Deutsche reinstated Molson Coors (TAP) at BUY, target from $50 to $65.
Full BUD-InBev Coverage and Analysis
Life After Anheuser-Busch (BUD): Shareholders Win, Consumers Lose (BUD)
More Pressure On Anheuser-Busch (BUD): Molson Coors (TAP)-SABMiller JV Is Called a “Game Changer” (BUD, TAP)
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