AB InBev Gets SABMiller for $107 Billion as U.S. Deal Agreed.
The world’s two biggest beer makers will join forces to create a company that produces almost a third of the world’s beer. Anheuser-Busch InBev NV made a formal $107 billion offer for SABMiller Plc, sealing a long-anticipated deal that combines the world’s biggest brewers into a company controlling about half the industry’s profit.A Brobdingnagian beer company is closer to becoming reality, as Anheuser-Busch InBev has worked out terms to buy its biggest rival, SABMiller, for more than $105 billion.MONTREAL – Molson Coors is poised to get worldwide control of the Miller brand name and ownership of its U.S. beer business in a US$12-billion agreement tied to the takeover of SABMiller by the world’s largest brewing company, Anheuser-Busch InBev. “This transaction is a game-changing opportunity for Molson Coors and advances our ambition to be the first choice for consumers and customers,” Molson Coors president and CEO Mark Hunter said in a statement Tuesday from Denver and Montreal, where the company has dual headquarters. “In short, we will be a more competitive global company, better positioned to invest behind our core brands, expand our above premium portfolio, strengthen our commercial execution capabilities and deliver long term shareholder value.” SABMiller agreed to sell its 58 per cent stake in the MillerCoors joint venture, which is 42 per cent owned by Molson Coors, in an effort to ease regulatory concerns that AB InBev would have a stranglehold on the U.S. market after the merger.
Francesco Curto, of Deutsche Asset & Wealth Management, and Bloomberg’s Matt Campbell, discuss AB InBev’s formal offer to buy SABMiller and what it means for investors. To gain regulatory approval, Molson Coors Brewing Co. will acquire SABMiller’s 58 percent stake in MillerCoors for $12 billion, giving it full control over brands like Coors Light and Blue Moon.
AB InBev and SABMiller own hundreds of brands, including Budweiser, Corona, Grolsch, Stella Artois and Labatt, a formerly independent Canadian company. The companies had been weighing a deal since mid-September, with SABMiller rejecting several overtures from the Belgian firm before accepting the deal. AB InBev is seeking to bolster growth by acquiring SABMiller’s businesses in Africa and Asia as changing tastes and the growth of craft beers cut sales in developed markets. The enlarged brewer will have the number one or two positions in 24 of the world’s 30 biggest beer markets, and provide AB InBev its first toehold in Africa, where about 65 million people are due to reach the legal drinking age by 2023.
The deal “promises to transform the global brewing landscape,” said Jon Copestake, an analyst at the Economist Intelligence Unit. “The divestment of SABMiller’s North American business will placate American regulators to some degree, but there will remain regulatory obstacles to a merger of this size.” The Belgian and Brazilian families that control AB InBev will see their ownership diluted from more than 50 percent to 34.5 percent, and will hold nine of 15 board seats. The company also says the combined company “would be able to provide more choice and more opportunities for consumers to taste and enjoy the world’s best beers.” The deal is likely to have global repercussions for the beer industry — both in the U.S., as the Molson Coors deal shows, and in areas where SABMiller is the dominant beer company, notably in Australia and large sections of India, Eastern Europe and Africa. Once that deal is finalized, which is expected to happen in the coming months, Labatt will have a bigger stake in both the growing pre-mixed drinks and ciders markets, which have been growing in popularity. Though AB InBev got SABMiller’s main shareholders on board and lined up the largest-ever acquisition debt package, Erik Gordon of the Ross School of Business at the University of Michigan said the deal faces regulatory risks.
Brito told investors that the two companies have a “largely complementary” footprint and that the new company will “take its place as one of the leading consumer products companies.” Anheuser-Busch is betting that it can leverage the broader footprint to pursue growth opportunities in Africa, Asia and the Middle East. The law firm advised lenders including Banco Santander SA, Bank of America Corp., Bank of Tokyo-Mitsubishi UFJ Ltd., Barclays Plc, BNP Paribas SA and Deutsche Bank AG. The company is paying a premium of about 50% above SABMiller’s stock price on Sept. 14, the last day before media reports disclosed the acquisition talks.
MillerCoors represented the biggest antitrust hurdle to the merger, analysts have said, though SABMiller’s stake in China’s CR Snow may also need to be sold. The $1.4 billion of projected annual savings equals about 9 percent of SABMiller’s sales, excluding joint ventures and associates, according to RBC Europe analyst James Edwardes Jones. AB InBev achieved cost savings representing about 18 percent of sales when it bought Anheuser-Busch Cos. in 2008 and 21 percent for Mexico’s Modelo in 2013, he said. The Budweiser maker will pay 44 pounds a share in cash for a majority of the stock, the companies said, confirming a price accord announced on Oct. 13. For AB InBev CEO Carlos Brito, the combination would cap a $90 billion dealmaking spree over the last decade, turning a regional brewer into the undisputed global leader.
The SABMiller proposal is an acquisition partly borne out of necessity, with AB InBev’s growth set to slow over the next five years, estimates compiled by Bloomberg show. The Belgian brewer could benefit from access to emerging markets in Latin America and Africa where SABMiller operates, yet it’s unclear whether the U.K. brewer’s leaders, including CEO Alan Clark and Africa chief Mark Bowman, will stay on. Robey Warshaw, JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs & Co. are advising SABMiller, which sought legal advice from Linklaters and Hogan Lovells International.