SABMiller takeover talk lifts JSE

The new JSE logo.THE local stock market was boosted by news that SABMiller [JSE:SAB], the second-biggest company on the JSE and the world’s second-biggest brewer, is facing a possible takeover bid from the world’s biggest brewer Anheuser-Busch InBev.

At one stage on Monday morning SABMiller was almost 5% higher than on Friday, after reports that SABMiller has made an offer for Heineken to help defend itself against a potential bid by AB InBev.

The Heineken family, which owns the Heineken group, were reported to have turned down the offer, which makes SABMiller more vulnerable to an unwanted takeover bid.

Due to SABMiller’s big market capitalisation and its weight, the industrial index improved by 0.75% in initial trading which in turn helped the major indices rise marginally higher by midday on Monday. At noon the All-share index had gained 0.21% to 51 355 and the Top 40 index was 0.31% higher.

By midday SABMiller was 4.10% higher at R635 on a new 52-week high, beating the previous best set on June 17. At one stage the share was 5% higher at R644.92. More than 450 000 SABMiller shares were sold at a value of R288.3m.

Analysts said a possible merger between SABMiller and Heineken would not make much sense, but if successful it would create a company impossible for AB InBev to digest.

Trading only started at about 11:00 on Monday morning because of a connectivity problem. The initial corrective action applied by the JSE did not resolve the issue, which caused the opening auction to be delayed. By midday everything seemed to be running smoothly.

SABMiller was however not the busiest share in terms of value as 1.222 million shares in MTN [JSE:MTN] were sold for R303.3m. The share lost 1.06% to R248.15 on investor concerns about the influence of new regulations to cap the fees cellphone companies can charge competitors to relay their calls.

The oversold resources sector started the day higher, but by midday all gains were again lost and the Resource index was 0.09% weaker. Resources shares are still supported by the weaker rand, which was trading at more than R11.00 to the dollar, but concerns about the state of the Chinese economy increased on Monday morning after disappointing data over the weekend put a damper on the market.

Asian stocks stumbled to their lowest level in five weeks on Monday after a batch of weak data out of China raised the spectre of a sharp slowdown in the world’s second-biggest economy.

Read: Asian shares fall on weak China data

Data released on Saturday showed China’s factory output grew at the weakest pace in nearly six years in August, while growth in other key sectors also cooled.

The bearish Chinese data added to worries about a 40% slide in iron ore prices.

On Monday morning Anglo American [JSE:AGL] improved by 0.53% to R256.66, but BHP Billiton [JSE:BHP] with its bigger exposure to iron exports to China lost 0.41% to R330.74.

On Monday morning the dollar was at its highest level in 14 months on indications that American interest rates may rise sooner rather than later. Imara SP Reid said in its daily Market Snapshot that the weekly indicator on yields on ten-year treasury bonds has reversed direction appreciably for the first time since November.

Bond yields are a good indicator of what will happen with interest rates. Investors should take note of that, as higher yields can adjust funds flow to emerging markets like South Africa.

The prospect of higher interest rates in the US and its devastating effect on the rand could also influence the South African Reserve Bank’s decision on interest rates later this week, as higher rates can attract more foreign capital to finance the huge deficit on the current account.

The market is not expected to move much this week as investors wait for the Reserve Bank’s decision on Thursday. The latest inflation data is also expected on Thursday.

In the meantime, banking shares are under pressure and FirstRand [JSE:FSR] and Barclays Africa [JSE:BGA] were both 1.39% lower. FirstRand traded at R43.47 and Barclays Africa at R161.18.

– Fin24