Anheuser-Busch InBev, SABMiller Reach $104 Billion Merger Agreement
By Burt Carey
The world’s two largest beer companies announced tentative agreement Tuesday on a $104.2 billion merger.
Anheuser-Busch InBev, already the world’s largest beer maker, and SABMiller agreed to terms that will put 18 of the 40 best-selling brews worldwide under a single company, with potential annual sales of $55 billion. The deal comes following a fifth attempt by AB InBev to buy out its top competitor.
“The Board of SABMiller has indicated to AB InBev that it would be prepared unanimously to recommend the all-cash offer,” the companies announced in a joint statement. Belgium-based AB InBev would make a commitment to attain regulatory clearances before the deal is finalized. If it doesn’t, AB InBev will pay SABMiller a $3 billion fee. AB InBev has until Oct. 28 to create a formal offer.
Should the agreement come to fruition, it will rank as the largest deal in the industry and one of the top five corporate acquisitions ever.
What the deal means to SAB Miller investors is a huge cash payout, plus stock in the new company. Tobacco giant Altria and the Columbian-owned BevCo hold a 41 percent stake in SABMiller. Both reportedly urged Miller executives to sign the deal.
What it means to consumers is that there’s a 1-in-3 chance they will be partaking of an AB InBev product the next time they buy a beer. Its best-selling beer, Bud Light, ranks third in overall sales worldwide, behind two Chinese brews, Snow and Tsingtao. Budweiser, trademarked as the Champagne of Beers, ranks fourth in worldwide sales. Such dominance in the market will lead regulators in several countries, notably China and the United States, to take a hard look at the proposed deal.
As a combined company, AB InBev/SABMiller would own some of the world’s most popular and recognizable beer brands. Beers under the current AB InBev house include Budweiser and Bud Light, Corona, Stella Artois, Beck’s, Michelob and Blue Moon. London-based SABMiller brews about 200 beer brands, including Miller High Life, Miller Lite, Genuine Draft, Peroni, Milwaukee’s Best, Grolsch and Aguila.
Industry analysts say AB InBev and SABMiller almost have to make a deal work if they are going to compete with a fast-growing craft beer market. Estimates in the U.S. alone suggest that craft brewers now account for 10 percent of beer volume after having less than 1 percent of the market just a few years ago.
To combat the trend, both companies have bought several craft brewers in recent years. AB InBev has purchased Goose Island, Blue Moon, Elysian Brewing and 10 Barrel Brewing, while SABMiller bought Meantime Brewing Company in London.
Regulators will be concerned that the combined company could suppress competition, resulting in higher prices and fewer choices for consumers. One possible option is that regulators could force the sale of some assets, such as SABMiller’s stake in MillerCoors and its partnership with China Resources Enterprise, which makes the world’s No. 1 beer brand by volume, Snow (available only in China).