Anheuser-Busch InBev (NYSE:BUD), the world’s No. 1 brewer with over 200 brands, said it’ll make a friendly offer for No. 2 SABMiller.
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Given that the addition of SABMiller to AB InBev’s umbrella is going to literally complete the latter by bringing in untapped markets across Africa and South America, along with bringing the combined market share in key markets such as the U.S.to over 70%, might make it { almost | almost }impossible for other players in the beer space to compete.
“A takeover approach for SABMiller by AB InBev recently gained urgency amid slowing beer sales around the globe, including the { US | USA}, AB InBev’s most-important market, where small “craft” brewers are swiping market share”, the WSJ wrote. In 2004, Colorado-based Coors merged with Canada’s Molson, forming Molson Coors, which, in turn, announced a joint venture with SABMiller, forming MillerCoors in 2007. Now the company plans to create even more affordable brews using locally sourced ingredients such as cassava-a root vegetable that yields a rich starch-in place of more expensive imported alternatives such as maize. Furthermore, Soroban Capital Partners Lp have 6.12% of their stocks portfolio invested in the company for 7.45 million shares.
Sources suggest that a further announcement will come this week although it has been said that SAB Miller’s board is keen not too bow too quickly.
SAB issued a statement to note press speculation about a takeover and acknowledge AB-InBev’s inquiry. Executives at Anheuser-Busch reached out to Altria, which owns 27% of SABMiller to see if it would support a deal.
They are said by analysts to be looking for equity (in order to avoid capital gains tax) rather than debt in any transaction – which is likely to be highly complex. Coke and Pepsi declined to comment. The $275-billion merger in the making between the world’s top brewers – some are calling it the end of history in brewing M&A – will create a combine which is either a leader or a strong number two in most markets.
The companies are being pushed into consolidation by eroding market share and competition, ironically, by the little guy. The business’s revenue was down 9.4% compared to the same quarter { last year | last year}. If, for any reason, the 58% stake { cannot | can’t }be sold, we believe the entire ABI bid for SABMiller would collapse.
In any case, if a deal can be struck, observers are unanimous in their opinion that the beer sector in Asia – and elsewhere – is in for an interesting few years.
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Meanwhile, AB InBev has distribution agreements with PepsiCo in Latin America, including the exclusive right to bottle, sell and distribute certain Pepsi brands in Brazil.
