Langton Capital – 2015-09-16 – Daily Wrap: SAB Miller bid approach, tour operators, uses of money & other:
Leisure Wrap & Other:
So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following. As always, contact us if you’d like further details:
AB InBev makes approach to SAB Miller – now that would be a large brewer!
• Following a period of consistent speculation, SAB this morning announced ‘the Board of SABMiller notes the recent press speculation and confirms that Anheuser-Busch InBev… has informed SABMiller that it intends to make a proposal to acquire SABMiller.’
• It goes on to say ‘no proposal has yet been received and the Board of SABMiller has no further details about the terms of any such proposal.’ It adds ‘the Board of SABMiller will review and respond as appropriate to any proposal which might be made.’
• SAB concludes ‘there can be no certainty that an offer will be made or as to the terms on which any offer might be made. In the interim, shareholders are strongly advised to retain their shares and to take no action.’
• AB InBev has also made an announcement saying ‘AB InBev’s intention is to work with SABMiller’s Board toward a recommended transaction.’ It also highlights ‘there can be no certainty that this approach will result in an offer or agreement, or as to the terms of any such agreement’ and it says ‘a further statement will be made as appropriate.’
• Any merger that did not involve truly massive disposals in order gain competition clearance would create an extremely large, global brewer. AB InBev is a clear global number one. SAB and Heineken vie for the no2 and each is about a half the size of AB InBev. Carlsberg is number four at around a third of the size of AB.
• Customers may complain and competition authorities the world over may be sharpening their pencils but we would assume that a significant amount of planning has gone into the proposed deal and we await details with interest.
Tour operators end summer strongly:
• It seems to us as though the flip side to a somewhat weaker summer, especially August, for UK licensed & general retailers, is that the overseas holiday companies should have performed well.
• Indeed Homebase, BDO, the Peach Tracker, Greene King and a number of other commentators have suggested that, notwithstanding the fact that Hoseasons (see below) had a good summer, more people were out of the country this August than they were last
• We know about Tunisia, Greece etc. This should be in the price & both TCG & TUI have given some idea as to the size of the financial hit that they expect as a result of travel disruption over the summer
• TCG updates on Q4 next Thursday (24 Sept) and TUI updates on 1 Oct.
• We have no particular reason to believe that Scandinavia or Germany will have let the companies down and expect these updates to be relatively upbeat.
• TUI was amongst the FTSE’s few fallers yesterday. It may have moved up a little post the absorption of TUI Travel – but this does not alter our view that trading should have been good
• Thomas Cook is attracting some bid comment. The Travel Weekly (here) reports on the suggestion that Chinese minority shareholder Fosun could bid for c95% of Thomas Cook that it does not already own.
• TW points out ‘Cook’s shares had been languishing just above the 100p mark for much of the summer, down from highs of around 185p following its successful turnaround under previous chief executive Harriet Green.’ It highlights the formation of the existing JV with Fosun and points out that this was ‘followed that with plans for a global deal which includes marketing the French all-inclusive operator’s holidays through 150 stores in the UK.’ It says ‘Fosun and Cook last month signed a join venture to acquire up to 50 hotels and resorts around the Mediterranean.’ In addition, Fosun has taken 5% of Thomas Cook via a placing and has announced that it intends to buy another 5% in the market.
• We would prefer to buy the group on fundamentals but, hey, every little helps.
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Price of corn still edging a little higher. Virtually all other commodities bumping along the bottom.
• Deltic’s LfL sales look impressive at +7.5%. We are not clear at this point just how much capital spending may be involved in generating the increase.
• Some interesting stuff on the changing uses of money here. Use of cheques halved, debit card usage x5 and no details on contactless as this is 2014 data:
• Hoseasons has had its fifth good summer in a row. Staycations have benefited both the company & the economy. But we have to at least be mindful that we may be looking through the rear-view mirror. August seems to have been a winner for the tour operators, more people seem to be travelling overseas.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Deltic (formerly Luminar) has reported LfL sales +7.5% in the half year to end-August. Total sales rose by 15.5%.
2. Some 33 MPs are to take part in a day in Parliament today to highlight the importance of tourism to the UK economy.
3. M+C reports that coffee shop chain BB’s Coffee + Muffins aims to double in size over the next five years via new openings in UK + Ireland
4. Taco Bell is to sell beers, wines + spirits from 22 Sept. Co has c6k outlets in US. Starbucks also recently announced it is to sell booze
5. Figures from IMRG show online retail sales in the UK recorded their weakest August growth for 15 years this year.
6. Money: B of England comments on payment habits, underlines requirement that businesses adapt to remain relevant re debt cards, contactless, etc.
7. Accor Hotels is to take over 2 hotels in Iran, aims to secure >100 more over next 10yrs as the country opens up
8. Domestic tour operator Hoseasons is celebrating its fifth record summer in a row, crediting the appeal of UK breaks for the performance
9. United Federation of Travel Agents Associations (UFTAA) writes open letter to IATA accusing airlines of exploiting fuel surcharges
10. Air India is to ground 130 cabin crew for being overweight after warning last year that 600 of its 3,500 staff must slim down.
11. Merlin produces its Q3 trading update on Thursday. Shares currently on PE of c22x earnings despite recent pull back. See email for details
12. Ladbrokes has announced that Paul Bowtell, CFO Coral Group will be CFO of the combined business. Ian Bull is to leave the co
13. UK CPPI fell to 0% in August from July’s rate of 0.1% due to a smaller rise in clothing prices, according to the ONS.
a. World Bank warns that higher US rates could destabilise developing countries. Change always brings, well, change.
b. US retail sales up by 0.2% in Aug thanks to spending on cars, eating out, groceries + clothing, according to US Commerce Department
c. House prices in Britain rising fastest in East of England, up 8.3% in year to the end July compared to a 5.5% rise in London per ONS.
d. Senior union leaders are threatening to lead strikes in protest of the Government’s new Trade Union Bill.