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One trader just made US$1.7m on AB InBev's impending offer
[LONDON] A single trade, made yesterday, wagering that shares of Anheuser-Busch InBev NV would surge is now paying off big time.
A block of AB InBev calls betting on an 11 per cent advance in the next three months changed hands on Tuesday, sending volume of bullish options to its highest level since April 2014. The trade cost 1.09 million euros (US$1.2 million), and is now worth more than 2.63 million euros. Shares soared as much as 12 per cent on Wednesday after the Budweiser maker said it wants to bid for SABMiller Plc.
"That was such a clever trade," said Steve Schlemmer, who specializes in European merger arbitrage at Churchill Capital UK Ltd. in London. "Everyone was rooting for this one - it had been rumored forever, and it makes perfect sense."
A block of 6,500 calls betting that AB InBev shares will go to 105 euros by December changed hands at 3:21 pm London time on Tuesday. That pushed the number of bullish contracts to 8,441, more the four times higher than put trades.
AB InBev said it plans to make an offer for SABMiller, which would combine Budweiser with brands including Grolsch and Peroni, to control about half the profit of the global brewing industry. On Tuesday, renewed speculation over a deal sent shares of the UK company up as much as 4.1 per cent, while the Belgian beermaker remained little changed.
"Shareholders clearly wanted AB InBev to do a big acquisition, something that could have a real impact," said Frederic Ponchon, who helps oversee about 3 billion euros at Sycomore Asset Management in Paris, including AB InBev shares. "But I was a little bit surprised about today's news."
AB InBev has informed SABMiller of its intentions, though no proposal has been made and no details are known, the UK company said in a statement. AB InBev said it plans to work with SABMiller "toward a recommended transaction." AB InBev didn't immediately respond to requests seeking comment on the options trading.
The announcement helped send the Stoxx Europe 600 Index up as much as 1.5 per cent, after weeks of volatility and growth concerns dragged it to a seven-month low in August.
"It's also bullish for deals in general," Mr Schlemmer said. "By choosing now, they're signaling they don't think there's going to be another leg down in the market."