Touted as one of the worlds largest takeoverdeals ever,Anheuser-Busch InBevsoffer to buySABMiller(LSE: SAB) is taking some time to finalize.
TheTakeover Panel has already twice extended the deadline for AB InBev to make a firm offer for SAB but no offer has materialized, and it looks as if the market is starting to doubt that the deal will go ahead.
Indeed, despite having announced an agreement in principle of 68bn, SABs market value remains depressed. Attimeof writing, the companys market cap. is only 65bn, a full 3bn below the proposed offer price.
The market is right to be concerned, as the two parties haventyet made the deal official. Whats more, even if the two set of management do agree on a price, the merger still has to get the green light from regulators around the world.
And if the deal does fall through, its possible SABs shares will fall back to the level they were at before the offer was made public around 20% below current prices. With this being the case, it might be wise for risk adverse investors to sell SAB, take the cash and run.
Slow and steady
If you are thinking of selling SAB,Diageo (LSE: DGE) could be an excellent replacement for the company in your portfolio. Over the past tenyears, Diageos revenue has increased at the steady rate of 4.1% per annum.
Earnings per share have risen by 42% over the same period, and the companys per-share dividend payout to shareholders has increased 80%. The companys defensive nature has protected investors from the markets turbulence for the past decade.
Including dividends, Diageos shares have returned 9.4% per annum, outperforming the FTSE 100 by approximately 4% p.a.. Diageo currently trades at a forward P/E of 21 and the companys shares support a dividend yield of 3.1%.
Surging ahead
Fevertree Drinks (LSE: FEVR) is another company that could be a greatreplacement for SAB in your portfolio. Theres no other way of putting it Fevertreehas had a stellar run since it came to market at the end of last year. Indeed, since its IPO, Fevertrees shares have leapt more than 210% in just 11 months, outpacing the majority of the wider market.
And the majority of these gains can be traced to the companys impressive underlying business performance. For example, for the six months to the end of June 2015 Fevertree reported revenue growth of 62% to 24.1m, adjusted earnings before interest tax depreciation and amortization rose 68% to 7.2m, and 83% of adjusted EBITDA was converted into operating cash flow.
Following this positive performance, a further trading update issued by the company at the beginning of this month notified the market thatresults for the full year will be materially ahead of board expectations.
However, while Fevertrees performance is highly impressive, the companys shares are extremely expensive. City analysts expect the company to report earnings per share of 9.4p for 2015, which indicates that the company is trading at a forward P/E of 46.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
