Beer Giants Anheuser-Busch InBev and SABMiller Agree to Deal, But Trouble Brews

Antitrust rumblings pose a sobering threat to the beer industry’s largest merger, which would significantly boost AB InBev’s emerging-markets exposure.


< Deals of the Year 2015: Six Transactions that Made a Big Impact
A toast is in order, just in time for the holidays. On November 11, Belgium-headquartered brewer Anheuser-Busch InBev announced plans to swallow its closest rival, SABMiller, for the heady sum of $117.4 billion. The pending deal, the largest merger in beer industry history and one of the biggest-ever M&A transactions, has stirred antitrust rumblings that threaten to derail months of negotiations. Short of buying everybody a cold one, the world’s two top suds makers are taking steps to smooth the way.

If they join forces, AB InBev and SABMiller will share a cooler chock-full of boozy brands, from the former’s Budweiser, Corona and Stella Artois to the latter’s Castle Lager, Foster’s and Pilsner Urquell. They’ll need a name — hopefully, something more creative than their penchant for brand mash-ups suggests. In the meantime, analysts have dubbed it Megabrew, and for good reason. The two companies’ net revenues for 2014 totaled $69.4 billion, nearly triple that of their nearest rival, the Netherlands’ Heineken International.

Together they will occupy every major beer market. With sales stagnating in developed markets, including Anheuser-Busch’s native U.S., AB InBev CEO Carlos Brito, 55, recognized the need to enter faster-growing arenas. Through the combination, Brito’s Leuven-based conglomerate will gain a significant presence in Africa, which it currently lacks. SABMiller, which began as South African Breweries in 1895, derives roughly a third of its revenue from 17 countries throughout that continent. Africa is expected to see 5 percent annual growth in beer consumption through 2017, while sales in North America and Western Europe remain flat, according to Canadean, a London-based market research firm.

AB InBev is offering £44 ($66) a share in cash for SABMiller, a premium of more than 50 percent on the London-based company’s closing price on September 14, the day before the first proposal became public. Shareholders can opt for an alternative payout equaling about £41.85 per share in cash and restricted stock. If the merger plans fall through, AB InBev will dole out a $3 billion breakup fee to SABMiller shareholders. The banks on both sides — principally Lazard, representing AB InBev, and London-based boutique Robey Warshaw, advising SABMiller — are expected to share up to $235 million in fees, Freeman & Co. reports.

The union is supported by tobacco titan Altria Group and BevCo, the holding company of Colombia’s Santo Domingo family. They collectively own 40.45 percent of SABMiller stock, and have chosen the restricted-shares option. Dutch holding companies BRC and EPS Participations, which together control 51.8 percent of AB InBev, also gave the okay. Brazilian private equity firm 3G Capital, which fashioned AB InBev through a series of mergers between 2004 and 2008 and remains its largest shareholder, was instrumental in securing approval on both sides through direct talks with SABMiller shareholders. That move rankled some observers, who viewed CEO Brito’s and 3G’s methods as hostile.

The market is responding positively: Between the first signs of an agreement in September and December 1, SABMiller’s share price climbed by 38 percent and AB InBev’s stock rose 20.3 percent. But before the deal closes in the second half of 2016, both parties must address antitrust concerns with regulators everywhere. The united companies would control nearly one in three beer sales worldwide.


They’re already arranging to unload assets in a bid to win regulatory approval. SABMiller will sell its 58 percent interest in MillerCoors, along with the global Miller brand, to Molson Coors Brewing Co. for $12 billion if the AB InBev deal closes. AB InBev is also considering shedding SABMiller’s Dutch brand Grolsch, Italian beer Peroni, U.K.’s Meantime and Snow lager, China’s top-selling beer brand, to appease European and Chinese lawmakers.

2015 Deals of the Year

  1. Allergan-Pfizer Merger Gives Pharma a Growth Injection
  2. Beer Giants Anheuser-Busch InBev and SABMiller Agree to Deal, But Trouble Brews
  3. Investors Wait for Dell-EMC Deal To Pay Off
  4. Investors Remain Lukewarm About Kraft-Heinz Merger
  5. Banco Santander Deal Makes Its Mark
  6. Frontier Communications Bond Deal Defies High-Yield Exodus