Wyatt Research Week in Review: Oct. 4-10

Trouble is brewing for the proposed mega-merger between Anheuser-Busch InBev NV (NYSE: BUD) and SABMiller PLC (OTC: SBMRY), the world’s No. 1 and No. 2 beer companies.
On Wednesday, SABMiller – whose stable of beers includes Foster’s, Peroni, Pilsner Urquell and the Miller family of lagers – rejected a $104 billion takeover offer from the owner of the Budweiser, Corona and Stella Artois brands.
SABMiller claimed that AB InBev’s offer “still very substantially undervalues” the company.
AB InBev shot back on Thursday, maintaining that SABMiller’s position “lacks credibility.” In its official response, AB InBev cited the fact that tobacco giant Altria Group (NYSE: MO), which has a 27% stake in SABMiller, publicly urged the company’s board of directors “to engage promptly and constructively with AB InBev to agree on the terms of a recommended offer.”
SABMiller’s leverage in the spat is its African footprint. As the graphic below shows, SABMiller holds a commanding market share lead in beer’s last frontier.

Source: AB InBev press release

But really, did anyone actually expect a completely harmonious union from the two companies that have subjected American sports fans to decades of TV attack ads about which has the better light beer?
And even if the Bud and Miller makers are able to put their differences aside and agree on the beer tab, any deal would likely face antitrust scrutiny across the globe. Without any divestitures, the combined entity would control 70% of the U.S. beer market.
So before investors raise a glass to the combined beer behemoth, they should consider the possibility that even after a few more rounds of negotiations SABMiller might conclude that any AB InBev counteroffer is less filing than it’s prepared to swallow.
Here are some of my favorite Wyatt Investment Research articles from the week:
Is GE’s Share Price Really Set to Double? – General Electric (NYSE: GE) shares popped 5% Monday on news that activist investor Nelson Peltz’s Trian Fund Management has invested $2.5 billion in the company. CNBC’s resident stock market expositor Jim Cramer was so enthused by Peltz’s investment that he speculated the GE stock price could double. Is Cramer just blowing smoke, or is the 123-year-old conglomerate ready for liftoff?
Top 5 Dividend Increases for October – Most dividend talk is focused on yield. However, dividend increases can have a much more meaningful impact on your portfolio. And Wyatt Research analyst Marshall Hargrave has uncovered five stocks that are paying investors more in October.
Alcoa Split: Will One Plus One Equal Three? – With aluminum prices plummeting, earnings season bellwether Alcoa (NYSE: AA) announced on Sept. 28 that it will split the company in two. The first part of the split company will be the upstream business that has been buffeted by falling aluminum prices. It will retain the name Alcoa. The second unnamed company will consist of Alcoa’s high-margin downstream businesses, including specialty metals products for the aerospace, trucks and autos, construction and power industries. Is Alcoa worth owning before the split?
This 6% Dividend Stock Is a Risky Bet – Gaming stocks have suffered a brutal decline this year, due to rising fears over the fate of gaming activity in Macau, a special administrative region of China. And one casino company only generated $862 million of free cash flow during the first half of 2015, despite paying $1.3 billion in dividends. Unless conditions in Macau improve in a hurry, investors in this stock could be left holding the bag.
Discover the Riches of Poor Man’s Covered Calls – A poor man’s covered call is similar to a traditional covered call strategy – with one key exception in the mechanics.
Does the Weak Jobs Report Mean No Rate Hike This Year? – The Labor Department recently announced that in September employers added a relatively modest 142,000 new jobs, badly missing expectations. Economists had predicted 200,000 new jobs for the month. As if that weren’t disappointing enough, job gains in July and August were revised downward by a combined 59,000. Did the lackluster jobs report quash hopes of a 2015 interest rate hike for good?
General Motors and the Age of Smart Cars – General Motors (NYSE: GM) is, at the moment, trailing the likes of Google (NASDAQ: GOOGL) and Apple (NASDAQ: AAPL) in the race for autonomous smart cars. But GM is doing better in the connected-car arena, and now General Motors CEO Mary Barra has thrown down the gauntlet with plans to take on the technology giants in the nascent self-driving car industry.
The Auto Stock to Buy During the Volkswagen Fallout – German automaker Volkswagen AG’s (OTC: VLKAY) recent admission that it rigged diesel engines to beat emissions tests has sent shock waves through the German stock market. The iShares MSCI Germany Index ETF (NYSEArca: EWG) has now fallen 7% year-to-date. But one multinational auto stock, which has a stronghold in emerging markets, looks enticing as a potential merger partner for VW.
Have a great weekend!