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Bud…Weis…Mill…Er?


— September 17, 2015

Despite the aggressive posture of AB InBev and the venture capital group 3G Capital run by Lemann, the potential transaction will face a mountain of obstacles even if SAB Miller is a willing partner. AB InBev currently controls nearly half of the U.S. beer market with SAB Miller controlling nearly 30 percent. All major corporate mergers must face a Justice Department antitrust review. Diana Moss, the president of the American Antitrust Institute says “The competitive harm is pretty scary. The concern is higher prices for consumers.”


The insatiable appetite of Belgian-based beermonster Anheuser-Bush InBev (AB InBev) is rumbling again. The company, which is the maker of Budweiser products among countless others, has grown exponentially in recent years backed by Brazilian billionaire investor Jorge Lemann. Upon founding AmBev in 1999, the company went on to purchase Belgian brewer Interbrew in 2004, which in turn, purchased Anheuser Bush for $52 billion in 2008. Now the combined company is looking to acquire competitor SAB Miller in potentially one of the largest takeovers in history. AB InBev announced its interest to purchase the company in a statement Wednesday, although there have been no formal merger talks between the companies. If successful, the deal would give AB InBev 30 percent of the overall global beer market with a combined market value of over $276 billion. The size of the deal, and the resulting enterprise would likely ring antitrust alarm bells within the U.S., as well as in Europe and China. Based on English business law, SAB Miller has until October 14th to accept or reject the offer. In addition to its iconic Miller Lite and Miller Genuine Draft brands, SAB Miller also owns several import beers like Peroni and Grolsch.

In Wednesday’s statement, AB InBev wrote that it intends to work with “SABMiller’s Board toward a recommended transaction,” however adding “There can be no certainty that this approach will result in an offer or agreement, or as to the terms of any such agreement.” Although offering lukewarm optimism for a buyout, SAB Miller representatives responded to the announcement by saying, “The board of SABMiller will review and respond as appropriate to any proposal which might be made. There can be no certainty that an offer will be made, or as to the terms on which any offer might be made.” After a 20 percent surge in share prices following Wednesday’s announcement, SAB Miller is valued at around $90 billion. Analysts estimate a possible purchase would likely exceed $103 billion. While AB InBev has a dominant market present in the Americas as well as Europe, a purchase of SAB Miller will give the company an instant foothold in the Africa market, which AB InBev currently has none.

Despite the aggressive posture of AB InBev and the venture capital group 3G Capital run by Lemann, the potential transaction will face a mountain of obstacles even if SAB Miller is a willing partner. AB InBev currently controls nearly half of the U.S. beer market with SAB Miller controlling nearly 30 percent. All major corporate mergers must face a Justice Department antitrust review. Diana Moss, the president of the American Antitrust Institute says “The competitive harm is pretty scary. The concern is higher prices for consumers.” Passing the Justice Department muster, as daunting as that appears, may be an afterthought however. Lemann and AB InBev must first gain the support of cigarette producer Altria, as well as one of Columbia’s wealthiest families, the Santo Domingos’ approval first. Combined, the two entities own 41 percent of SAB Miller stock. If Lemann can convince the shareholders to accept a buyout, it is likely that SAB Miller will have to sell off assets involved with its joint venture with Molson Coors, called MillerCoors. The companies formed the merger in 2008 in order to consolidate operations within the U.S. SAB Miller will also likely face objection from regulators in Beijing over its joint venture CR Snow, with Snow being China’s biggest selling beer. Finally, it is unclear if AB InBev will be capable of securing enough financing to complete the deal, although Lemann worked with Warren Buffet to help complete the Kraft-Heinz merger earlier this year.  If these obstacles are cleared though, it will lead to the creation of the one of the world’s largest companies, and the dominant beer supplier in the world.

 

Sources:

Business Insider – Linette Lopez and Portia Crowe

Inquisitr – Patrick Frye

New York Times – Chad Bray and James Kanter

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