STZ reported earnings for 3Q 2014 last week STZ reported Selling General Administrative expense only 14% of Beer sales . Due to 3 year Supply agreement nonrenewable these costs are subsidized by Bud as a kickback for STZ 5,3 Billion purchase price. The short story is that this inflates STZ earnings in the short term and the profitability is a 1 time event confined to the 3 year subsidized supply agreement.
Well BUD can't buy because of antitrust ....But SAB/Miller can because by buying they would simply consolidate the 42% of Miller Coors they don't own....More probable Because the Coors Molson families have control of TAP ...TAP will be a buyer of the 58% of Miller Coors they don't own or would merge that Miller Coors USA partnership with Boston Beer if they give Jim Koch 10% equity with voting control....tough sell but Jim Koch is best Beer Administrator in the world
The Sands Brothers which control STZ had a net worth of about 800 million each in 2010 before negotiations
on the current Scheme took place ....you think that would be enough ....For certain People it's Never Enough
they always want more!
STZ bought Corona for 5.3 Billion in 2013.... Now 3Q 2014 STZ report 32% Net profit margin on sales. Last two years net profit margin was 16% How did net profits Double? STZ has a 3 year nonrenewable Supply agreement for supply Modello Beer below cost....STZ paid more for the Assets to get a 3 year supply agreement below cost....The Backside don't show up for 3 years so lets Party till it's 2017!
42% of Tap sales not in top line due to 42% equity in Coors Miller 7.5 Billion sales ....Incorporate that and STZ with 35% of total TAP sales has same market cap.....one is to high other is to Low
Why would you sell stock short of a business that trades at .7 x sales when others in the industry trade at 3x and 4x sales......What if the investement public turns more optomistic ,you would then be buried
those who fail to understand history ,must repeat it ! SAM was flat lined in sales from 1998 to 2001 at 180 million sales when BUD was playing Hardball, So I guess SAM Adams was a dying brand ! BREW now at 180 million sales with 8% sales growth Same market cap 130 million as SAM in 2000 except not 50 million in cash but 100 million in 1 million barrell brewing capacity ! A little different but when does distribution agreement expire?
Jim Koch will do anything market requires , if he needs more market size to sell th Brewery business to Berkshire Hathaway or Coca Cola for that matter he'll do it! BREW now sells same dollar amount of beer 180 million sa sam in 2001 , SAM was flat lined on sales at that level for 3 years in row ...Brew increasing sales at 8% Brew can be purchased at 50 million discount to SAM 2001 price ..it's a crazy value
but if the warrent owner was 1 institution with 200 million warrents and pressed the stock up from 11. to 12.75 to get a extra 1.75 x200 million or a two for 1 payday...watch out if he is unwinding now ! Price spiked on the holiday shortened monday so to my mind the games a foot and something evil this way comes
TAP just announced earnings and they seem adept at shifting mix to craft ....4.00 per year in current earnings .....about the same as SAM ....so a stock price of 52 minimum seems justified.....TAP issued a 500 million denominated 1year CV zero coupon Bond convertible at 50 expires July 15 2013.......that's the reason for stock drop on Starbev Buyout announcement ....the investment company that got that convertible sold TAP short against the CV .....I guess thet can do it all with complicated derivetives........anyway the value is above 52 13x current earnings.....how the heck it's gonna shimmy up there is the 64,000 question.......I know the Warren Buffett way is to never create a option ......i think Buffett was the buyer on the option dirived volumn and declining price only time will tell ...Buffett like a honey bee from BUD to TAP