Early tender results for Anheuser-Busch Inbev
admin | 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.
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.
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.
This material is intended only for institutional investors and does not carry all of the independence and disclosure standards of retail debt research reports. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.
This message, including any attachments or links contained herein, is subject to important disclaimers, conditions, and disclosures regarding Electronic Communications, which you can find at https://portfolio-strategy.apsec.com/sancap-disclaimers-and-disclosures.
Copyright © 2023 Santander US Capital Markets LLC and its affiliates (“SCM”). All rights reserved. SCM is a member of FINRA and SIPC. This material is intended for limited distribution to institutions only and is not publicly available. Any unauthorized use or disclosure is prohibited.
In making this material available, SCM (i) is not providing any advice to the recipient, including, without limitation, any advice as to investment, legal, accounting, tax and financial matters, (ii) is not acting as an advisor or fiduciary in respect of the recipient, (iii) is not making any predictions or projections and (iv) intends that any recipient to which SCM has provided this material is an “institutional investor” (as defined under applicable law and regulation, including FINRA Rule 4512 and that this material will not be disseminated, in whole or part, to any third party by the recipient.
The author of this material is an economist, desk strategist or trader. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM or any of its affiliates may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.
This material (i) has been prepared for information purposes only and does not constitute a solicitation or an offer to buy or sell any securities, related investments or other financial instruments, (ii) is neither research, a “research report” as commonly understood under the securities laws and regulations promulgated thereunder nor the product of a research department, (iii) or parts thereof may have been obtained from various sources, the reliability of which has not been verified and cannot be guaranteed by SCM, (iv) should not be reproduced or disclosed to any other person, without SCM’s prior consent and (v) is not intended for distribution in any jurisdiction in which its distribution would be prohibited.
In connection with this material, SCM (i) makes no representation or warranties as to the appropriateness or reliance for use in any transaction or as to the permissibility or legality of any financial instrument in any jurisdiction, (ii) believes the information in this material to be reliable, has not independently verified such information and makes no representation, express or implied, with regard to the accuracy or completeness of such information, (iii) accepts no responsibility or liability as to any reliance placed, or investment decision made, on the basis of such information by the recipient and (iv) does not undertake, and disclaims any duty to undertake, to update or to revise the information contained in this material.
Unless otherwise stated, the views, opinions, forecasts, valuations, or estimates contained in this material are those solely of the author, as of the date of publication of this material, and are subject to change without notice. The recipient of this material should make an independent evaluation of this information and make such other investigations as the recipient considers necessary (including obtaining independent financial advice), before transacting in any financial market or instrument discussed in or related to this material.