Big beer merger: Anheuser-Busch and Miller reach an agreement, but antitrust

Anheuser-Busch InBev, the world’s biggest brewer, launched its US$100 billion-plus (HK$780 billion) offer for nearest rival SABMiller yesterday and agreed to sell the latter’s stake in United States venture MillerCoors in a bid to win regulatory approval.

As part of the deal, AB Inbev said it would sell SABMiller’s 58 per cent stake in MillerCoors to Molson Coors in a deal valued at $US12 billion in cash, reflecting an effort to appease regulators concerned about the combined giant’s size.

But the USA market may be the least of AB InBev’s concerns.

The FTSE 100 firm, which owns Peroni and Grolsch, could also be forced to offload its market-leading Snow brand in China, where the country’s drinkers account for a quarter of global beer consumption.

‘We believe this combination will generate significant growth opportunities and create enhanced value to the benefit of all stakeholders, ‘ said AB InBev chief executive Carlos Brito in the statement.

The enlarged company’s shares will be listed in Brussels, Johannesburg and Mexico. SABMiller’s board announced October 13 that it had agreed in principle to unanimously recommend to its shareholders AB InBev’s proposal to pay £44 a share to buy the London-based brewer, marking a 50 percent premium to its share price on September 14, the day before media speculation about a potential deal emerged. That foresight made SABMiller attractive to AB InBev, already the world’s biggest beer maker, as it joins the list of worldwide companies seeking to cash in on the newest growth frontier.

But the Coors deal won’t go through unless the proposed mega-merger is first approved by anti-trust regulators.

The divestiture, which is contingent on the completion of AB InBev’s acquisition of SABMiller, would catapult Molson into the position of the No. 2 brewer in the USA, with a 25 percent market share second only to AB InBev’s 45 percent share.

SABMiller is the descendant of South African Breweries and has stretched its reach across the continent, betting that Africans will shift to higher quality beers as economic development increases disposable income.

The takeover would more than double Molson Coors’ revenue, which was $4.15 billion last year, cut costs by $200 million a year by 2020 and add about $1 billion in earnings before interest, taxes, depreciation and amortization.

AB InBev has a 155,000-strong global workforce and has $47.1bn of revenues. Jonny Forsyth, a global drinks analyst at Mintel, said the megabrewer will be forced to innovate, as it can’t just buy up all the craft brewers out there.