Molson Coors (TAP) Stock: Biggest Winner in SBMRY — BUD Merger

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The will-they-or-won’t-they between Anheuser-Busch InBev (BUD) and SABMiller (SBMRY) seems to have finally come to a conclusion: SABMiller approved of the acquisition by its largest rival in a deal worth $104 billion, or $67.50 per share.

Molson Coors (TAP) Stock: Biggest Winner in SBMRY -- BUD MergerWhile the agreement is clearly a huge win for SABMiller shareholders — the $67.50 price is 50% higher than the stock price before rumors of the deal surfaced last month — the biggest winner of all may actually be Molson Coors Brewing Company (TAP).

Wall Street agrees; TAP stock is up 10% today, while SBMRY stock is up 6% and BUD stock is up around 2%.

Here’s why TAP represents a unique opportunity for investors going forward:

MillerCoors Joint Venture

According to a report this morning from the Wall Street Journal, the Anheuser-Busch InBev – SABMiller deal will create a megacompany that accounts for about one in every three beers sold across the globe. (This all loops back around to TAP stock, I promise.)

In order to gain approval from regulators, however, SABMiller will have to divest some of its assets. The most significant of those will likely be the MillerCoors Joint Venture with TAP. Molson Coors owns 42% of the MillerCoors JV, while SABMiller owns the other 58%.

If regulators were to allow the merger, the newly formed company would own a whopping 70% of the U.S. market. That’s not gonna happen; SAB has to divest its stake in the MillerCoors JV. And therein lies the upside for TAP stock.

You see, Molson Coors has the right of first refusal to acquire the remaining 58% of the joint venture. Morningstar analyst Philip Gorham explains why that’s good for TAP stock holders:

“It’s pretty obvious that Molson Coors is the only buyer in town. Generally, that means they acquire the assets at a good price.”

Essentially, the market is telling us it thinks TAP stock will be a huge beneficiary of today’s move, as SABMiller is forced to move to sell its majority stake in the immensely valuable joint venture … and perhaps do so at fire sale prices, no less.

After all, there are few other beverage companies with the resources of Molson Coors that could actually afford to come to the table and buy that 58%.

And since TAP has the right of first refusal, even if a third party comes to the table and agrees to buy SAB’s stake for more than what Molson agreed to, Molson has the right to match that offer plus 5% — giving it a distinct advantage over any rival that might swoop in and try to ruin negotiations.

So, before you go snapping up SBMRY shares, consider putting some TAP stock on tap instead.

As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/10/molson-coors-brewing-company-tap-stock-sab-bud-merger/.

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