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Early tender results for Anheuser-Busch Inbev

| January 25, 2019

This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors. This material does not constitute research.

The Anheuser-Busch Inbev tender offer provides an opportunity to tender the 3.65% 2026 bonds, extend 3 years in maturity into the new 2029 bonds. The 7- to 10-year part of the ABIBB curve was previously much flatter at +15 bp, but investors can now pick up +28 bp.

Tender offer results

Anheuser-Busch Inbev released the early results of their $16.5 billion tender offer.  In total, $16.3 billion bonds were put in for tender by the early tender expiration. The pricing for the total consideration of the bonds occurred on 1/25/19.  Immediately following the pricing, ABIBB announced that they reallocated some of the pool caps so that the amount of each series accepted for purchase was equal to the amount tendered. The tender offer was roughly $200 million shy of the total goal.

Exhibit 1: Early tender results

Source: Bloomberg, Amherst Pierpont

Tender levels were not very compelling

Given that the company is in a position where it needs to reduce debt, it was noted in the ABIBB piece (dated 1/11/19) that tender levels were not all that attractive, particularly in the front end bonds.  With higher Treasury prices since the last tender offer in November, ABIBB used that as an opportunity to tender at spread levels that were wider than the last tender offer.  Furthermore, given that the new deal did not include any tenors less than the 6-year, holders of the shorter dated bonds that were tendered had no new ABIBB bonds to move into.

Relative Value

Despite the lighter participation in the front end of the tender, participation in the 2026s highlights further value in the 2029 and 2031 part of the curve.  At the time of the deal/tender announcement,  the most attractive trade opportunity was to tender the 3.65% 2026 bonds and extend into the new 2029 bonds.  That curve priced at +65 bp and tightened to roughly +50 bp in the greys.  The pick-up of roughly 50 bp to extend just under 3 years was attractive given that the curve was much flatter and worth approximately +15 bp.  Currently, that 2026 to 2029 ABIBB curve is worth approximately +28 bp.  There continues to be value in the 2029 bonds and feel that the ABIBB curve could collapse further given that the 7- to 10-year curve remains at roughly +15 bp.

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