SABMiller Rally Helps FTSE to Set One-Week High

LONDON (Reuters) – Top share index climbed to a one-week high on Wednesday, with SABMiller surging about 20 percent after news that AB InBev, the world’s largest brewer, was to make an offer to acquire the British firm, the world’s No. 2.

SABMiller said Anheuser-Busch InBev had informed it that it intended to make an offer, but SABMiller had no further information about the terms.

Shares in SAB, which owns such brands as Peroni and Grolsch, spiked 19.9 percent, while AB InBev, with the Budweiser, Stella Artois and Corona brands, was up 6.4 percent.

“In the global beverage industry, scale is everything, with such a deal potentially bringing very significant scale. Cost savings are likely to prove a major focus, with the combined portfolio of brands enviable,” said Keith Bowman, equity analyst at Hargreaves Lansdown.

A merged group would boast a market value of around $275 billion (177 billion pounds), based on current prices, and combine AB InBev’s dominance of Latin America with SABMiller’s strong presence in Africa, both fast-growing markets, and their breweries in Asia.

“ABI has a history of cutting costs and maximise synergies. They have always delivered on their promises and if this deal goes ahead, it would be good for both the companies,” Ronny Claeys, senior strategist at KBC Asset Management, said.

Barclays Capital analysts said that a deal was likely to create an incremental $1 billion of savings, adding that SAB’s current cost-savings programme of $600 million could result in a total saving of $1.6 billion, about 9 percent of SAB’s sales.

SABMiller helped the blue-chip FTSE 100 <.FTSE> to finish 1.5 percent stronger at 6,229.21 points. Earlier in the session, it rose to 6,244.94 points, the highest level in a week.

Investors’ focus stayed on a two-day policy meeting of the U.S. Federal Reserve, which will decide on Thursday whether to raise interest rates for the first time in nearly a decade.

The FTSE 100 is still down more than 10 percent since a record high in April, hit by market turmoil over concerns about China’s growth. This darkening economic outlook has pushed back forecasts of a Fed rate rise to later in the year, or even 2016.

Markets are currently pricing in around a 1 in 4 chance of a rate hike this week.

“Latest U.S. macro data is hardly likely to get the Fed into a rate hiking mood … We continue to expect the Fed to delay the hike until October at least,” David Meier, senior economist at Julius Baer, said in a note.

On the downside, shares in Mondi <MNDI.L> fell 4.7 percent, the top FTSE 100 loser, after Goldman Sachs cut its stance on the stock to “sell”.

(By Atul Prakash. Additional reporting by Alistair Smout; Editing by Mark Heinrich)