Cia de Bebidas das Americas SA’s decision to merge its two different classes of stock into single voting shares is likely to help increase earnings per share by about 12 percent next year, Bank of America Merrill Lynch analysts led by Robert Ford said on Tuesday. According to an appraisal value of 81.31 per new share “suggests that the transaction could increase AmBev’s equity base by about 86 billion reais ($43 billion), significantly enhancing its ability to pay tax-deductible interest on capital,” the note said.
The company, Brazil’s biggest, is commonly known as Ambev. Bank of America Merrill Lynch currently has a “buy” recommendation on preferred shares of Ambev with a price target of 95 reais.
Ford and his team expect the transaction, which is subject to approval of minority shareholders, could be completed in late July or early August. “Given the potential tax savings, which we estimate will fully offset the loss of the current preferred share dividend premium, and improve corporate governance, we expect the proposal to garner necessary minority support,” the note said.