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Altria Receives Augmented Stake in AB-Inbev-SABMiller Combination

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On October 13, SABMiller (SBMRY) and AB-InBev (BUD) announced that they have agreed in principle on the key terms of a possible recommended offer to be made by AB-InBev. The deal consists of an all cash offer of £44 (~$67.90) per share for ~59% of all SABMiller shares, not owned by the company’s two largest shareholders, Altria (MO) and the Columbian Santo Domingo family via BevCo. This represents approximately a 50% premium to SABMiller’s closing price on September 14, the last day before speculation of a takeover reemerged. All calculations have been made using October 12 closing prices. The remaining 41% of SABMiller shares, approximately 27% of which is owned by Altria with the balance being owned by the Columbian … Read more

Altria Benefits from Major Beer Deal Talks

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Altria (MO) may be finally cashing in on its “hidden” assets that we have been highlighting for some time. The company owns a 27% stake in SABMiller (SBMRY), and its shares are receiving a nice bump as a result of increased merger talks surrounding the brewer after speculation began early September 15. Rumors have been swirling for some time around beer giants AB-InBev (BUD) and SABMiller, but this time the news is coming from the two companies themselves. The acquisition, which has been intimated to be in the works, would be the largest in the industry’s history and would create a company that produces approximately one third of the world’s beer. No proposal has been received, but AB-InBev reportedly plans … Read more

Best Ideas Newsletter Excerpt: A+ for Altria and Apple

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By Brian Nelson, CFA Just as I’m writing the intro to this edition of the September edition of the Best Ideas portfolio, the good news keeps coming. If you’ve read anything about our top holdings, you’d be hard-pressed to miss a discussion on Altria (MO) and our thesis that goes into the tobacco firm’s 27% economic stake in fast-growing global brewer SABMiller (SBMRY) as support for not only its dividend growth but also its valuation. The news wires are buzzing that SABMiller approached Heineken (HEINY) for a tie-up, and that Heineken rejected its offer. However, there are now talks that Anheuser-Busch InBev (BUD) is looking to put together a bid for SABMiller, and shares of the latter are soaring on … Read more

The Dividend Dilemma

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One of the core tenets of the Valuentum process not only rests in the all-important price vs. value consideration (see Valuentum’s Brian Nelson talk about that here), but also in “letting winners run.” At first read, these two items appear to be at odds with each other. For example, we preach about getting stocks at a bargain, but yet, we don’t sell holdings when they start to move beyond our estimate of their fair value. What gives? At the Valuentum core, we prefer an entry point that corresponds to the time when shares have substantial valuation and pricing support (i.e. they have high Valuentum Buying Index ratings), and we prefer an exit point when shares have little valuation and pricing … Read more

Beer and Cigarettes

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Update: Shortly after the publishing of the following article, Reynolds American announced that it would acquire Lorillard in a deal valued at $27.4 billion, or a deal price of $68.88 per share (in-line with the high end of our fair value estimate range for Lorillard, as predicted). For more details >> ————— Let’s pick up right where we left off. On May 22, we commented that Reynolds American (RAI) and Lorillard (LO) have been looking to combine operations. Here’s what we wrote at that time: According to recent reports, tobacco giants Reynolds American and Lorillard continue to work to tie the knot. The speculated deal is rumored to be a three-way transaction that involves Reynolds’ shareholder British American Tobacco (BTI), … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Big Tobacco, Brewers Want to Continue Consolidation; Altria to Benefit

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Altria (MO) is a holding in both the portfolio of the Best Ideas Newsletter and the portfolio of the Dividend Growth Newsletter. The company operates in one of the strongest industries in our coverage universe as it relates to structural composition (think Porter’s 5 forces). The oligopolistic tobacco industry is attractive in a number of ways. Firms in the industry sell an “addictive” product (cigarettes and/or smokeless tobacco), have significant pricing power, generate high margins, and have strong returns on invested capital. Though declining trends in smoking in the US, threats of tobacco-related litigation, new tobacco regulation (labeling) that discourages tobacco use, and excise tax price shocks that may impact demand will always be concerns, we tend to like the structural … Read more

The Dividend Cushion Meets the Dividend Aristocrats

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By Brian Nelson, CFA At Valuentum, we know that forward-looking dividend analysis and opinion is all that matters for most income investors. That’s why we’ve provided the following screen of key constituents in the SPDR S&P Dividend ETF (SDY) and their forward-looking Dividend Cushion ratio. After all, the past is just the past. The future is what counts. The SPDR S&P Dividend ETF is a fund that tracks the the S&P High Yield Dividend Aristocrats Index, which is “designed to measure the performance of the highest dividend-yielding S&P Composite 1500 Index constituents that have followed a managed-dividends policy of consistently increasing dividends every year for at least 20 consecutive years.” To access either the 16-page stock report or the dividend report of each firm in the following modified ‘Aristocrats’ … Read more