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London - Anheuser-Busch InBev may issue a record amount of bonds if it buys SABMiller [JSE:SAB], according to BlackRock Inc.
The beermaker would probably raise about $60bn (R833bn) of debt to finance the acquisition, Owen Murfin, a portfolio manager on BlackRock’s global bond team, said at a briefing in London on Thursday. That would surpass Verizon Communications’ $49bn bond sale in 2013, which helped fund the buyout of Vodafone Group Plc’s stake in a wireless venture.
“If it goes through, it could cause the largest-ever investment-grade deal,” Murfin said. AB InBev would probably have to offer “quite substantial new-issue premiums” in such a large offering, he said.
A sale would fan a surge in investment-grade corporate bond issuance, which has jumped 21% worldwide this year, according to data compiled by Bloomberg. The increase, following 2014’s record, has been fuelled by companies locking in low borrowing costs and investors seeking higher yields amid near- zero interest rates.
“The market would accept it pretty easily, despite the size,” said Matthew Duch, a money manager at Calvert Investments in Bethesda, Maryland, which oversees more than $13bn in assets. The biggest concern is whether a takeover would be approved “and that is still a big question,” he said.
Competition concern
Competition regulators may scrutinize the possible merger, as combining AB InBev and SABMiller would create the world’s largest beermaker, controlling almost 30% of the global market. SABMiller has a market value of about $90bn, based on data compiled by Bloomberg.
AB InBev is close to lining up a group of banks to help finance a proposal, and it has sounded out SABMiller’s main shareholder Altria Group Inc. about a deal, people with knowledge of the matter said last week, asking not to be identified because the discussions are private. SABMiller has said that Leuven, Belgium-based AB InBev intends to make an offer.
“It’s a very good and economical time to go out and raise large volumes of debt,” said Edward Mulderrig, a London-based syndicate banker in UBS Group AG’s debt-capital markets team. Rates are near “record lows, which is helping drive the large volumes of M&A.”
Verizon paid a premium in its record 2013 issue, selling a 10-year portion with a relative yield of 47 basis points more than investors demanded to own bonds with similar maturities and BBB ratings at the time, according to data compiled by Bloomberg. The telecommunications company sold both fixed-rate debt, with maturities ranging from three to 30 years, as well as two portions of floating-rate securities, the data show.
