Apollo Global Management has teamed up with a group of institutional investors to buy a 49.9% stake in Anheuser-Busch InBev’s US-based metal container plants for about $3 billion.
Apollo (APO) said that the deal represents a “unique opportunity to invest in high-quality assets with long-term, stable cashflows” alongside the world’s largest brewer. The private equity firm said with this investment it intends to help AB InBev to optimize its assets and unlock shareholder value in the current complex market environment.
Meanwhile, AB InBev (BUD) hopes that the investment will create additional shareholder value by optimizing the brewer’s business at an attractive price and generate proceeds to repay debt, in view of its deleveraging needs.
As part of the terms of the deal, AB InBev will retain operational control of its US-based metal container plants. The brewer also announced that it has signed a long-term supply agreement to meet its metal container supply needs for the duration of the Apollo investment.
“Executing an institutional investment of this nature showcases Apollo’s unique ability to cut through complexity and use the strength of our platform to provide world-class companies with scaled, strategic solutions,” said Robert V. Seminara, Head of Europe at Apollo. “We are pleased to invest alongside AB InBev in its leading US metal container business, supporting AB InBev’s strategic plans and its employees.”
Additionally, AB InBev will have the right to reacquire the minority stake after five years following the closure of the transaction, at pre-determined financial terms.
Shares in Apollo have advanced more than 8% over the past month and are now up about 1% on a year-to-date basis. Looking ahead, the average analyst price target stands at $50.67, implying additional 5.2% upside potential over the coming year.
Deutsche Bank analyst Brian Bedell last week lifted the stock’s price target to $51 from $49 and reiterated a Hold rating.
In a note to investors, Bedell said that he favored stocks that have been the most hampered by low interest rates in the downturn earlier this year as well as “high quality companies levered to improving markets.”
The rest of the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is backed by 6 Buy ratings versus 5 Hold ratings. (See APO stock analysis on TipRanks)
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