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AAA-rated Train backs M&A mania at AG Barr, Heineken & Diageo

by David Campbell on Nov 28, 2012 at 08:37

AAA-rated Train backs M&A mania at AG Barr, Heineken & Diageo

AAA-rated Nick Train has backed takeover proceedings at beverage businesses AG Barr, Diageo and Heineken, three core holdings which altogether make up 27% of his Lindsell Train trust.

Train, who had previously said he was ‘inclined’ to endorse the AG Barr-Britvic merger, offered his endorsement for the deals ‘despite some high prices being paid’.

‘In truth, we find ourselves applauding the acquirers,’ he wrote in the company’s half-year statement.

‘In all three cases the shares have responded well to the corporate activity, with both Diageo and Heineken up a quarter or more in calendar 2012, as investors welcome the increased exposure to Emerging Market consumers and Barr up a still very useful 15%.’

AG Barr, owner of Tizer and Irn Bru brands, is hoping to merge with UK rival Britvic, while both Diageo and Heineken have set off on the acquisition trail emerging markets.

‘Perhaps our euphoria and that of other investors, will wear off and the premium price that Heineken, in particular, has paid to win Asia Pacific Breweries (APB) will come back and bite its ambitious board and shareholders. 

‘But, on balance, we think the lesson is that companies are right to take the risk, because strategic opportunities of this importance come up so rarely and need to be grasped with both hands.

‘A tough tide for the global economy means that strong companies can get transactions done, transactions that would simply not be available in happier times.’

Elsewhere Train continued to recommend selected media businesses, such as Pearson, Reed, Ebay and Nintendo, which he said were well positioned to exploit changing distribution models.

Over the six months to the end of September the trust has returned 28.4% versus return of 1.9% and a 0.6% return  on the MSCI World Index.

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