Anheuser-Busch/SABMiller Deal Shows Market Still Hungry For M&A; Oil & Gas Could Be Next

Kellner Capital believes that the Anheuser Busch Inbev SA (ADR) BUD/SABMiller merger is an indication of the continuing appetite in the M&A market for large deals.
Fund manager Chris Pultz believes that the companies will be able to appease global antitrust regulators and gain approval for the deal around the world.
The next huge wave of M&A could come from the oil & gas industry.

A pair of big M&A headlines have captured the attention of Wall Street on Wednesday, as Anheuser Busch Inbev announced the completion of a highly-anticipated $106 billion buyout of SABMiller. In addition, grocery giant Kroger Co KR announced an $800 million buyout of Roundy’s Inc RNDY, sending shares of the small-cap supermarket chain soaring 64 percent.

Benzinga had a chance to speak with Chris Pultz, manager of the Kellner Merger Investor Fund about what the Busch/SABMiller deal says about the current M&A environment.

Market Remains Hungry

Generally speaking, many investors are watching for signs that the current M&A boom has peaked. The last two M&A cycle peaks preceded major stock market crashes in 2000 and 2008, but the current cycle is showing no signs of slowing down.

"I think it's pretty amazing that they were able to put this size deal together in the timeframe that they were able to, especially lining up financing with 20 different banks to put together a $75 billion financing package," Pultz said of the Anheuser Busch/SABMiller deal.

Related Link: Anheuser Busch To Sell MillerCoors Stake As It Formalizes SABMiller Purchase

"It shows you the appetite and the ability of borrowers who are looking to do smart, strategic deals, the willingness of people to lend the money and the confidence of the banks to go out and syndicate that once they provide the bridge loans for these companies."

No Regulatory Roadblocks

Pultz sees no critical regulatory hurdles for the deal after SABMiller said that it would be selling its 58 percent stake in MillerCoors to joint venture partner Molson Coors Brewing Company TAP.

Although the deal could still hit regulatory snags in other parts of the world, including China and Australia, divesting the JV should clear the path for U.S. approval. "In the end, all the problems that they have are solvable, and they'll be able to sell off units to properly appease antitrust authorities around the world," Pultz explained.

Related Link: Walgreens-Rite Aid Buyout Will 'Hopefully' Put Downward Pressure On Drug Prices

Oil & Gas The Next Big M&A Wave?

When asked if the much-discussed wave of oil & gas M&A is still on the horizon, Pultz assured Benzinga that it's only a matter of time. He believes many potential deals have been put on hold for now until companies are more confident in volatile oil prices.

"If you're the seller of an asset, you don't want to be the guy who sold your company at $45 oil after it rebounds back to $65-plus," Pultz added. "Once you get one big guy making a move, it's going to be a pile-on effect where it will be a scramble for people to pick up the assets before they start to trade up again."

With the continuing stream of major deals such as the ones announced, as well as the potential for a landslide of oil & gas deals in the near future, the M&A market appears as strong as healthy as it has ever been.

Disclosure: the author holds no position in the stocks mentioned.