In South Africa – a critical market – AB InBev will have to overcome opposition from several unions.
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The divestiture, which is contingent on the completion of AB InBev’s acquisition of SABMiller, would catapult Molson into the position of the No. 2 brewer in the U.S., with a 25 percent market share second only to AB InBev’s 45 percent share. By purchasing SABMiller’s stake, Molson Coors will gain full control of the operations, and retain the rights to all the brands in MillerCoors United States portfolio.
AB InBev will divest of its almost 60% stake in MillerCoors as part of the transaction, in a move to please regulators anxious about one company having too much market power.
The research firm Euromonitor worldwide has estimated that a combined Anheuser-Busch InBev-SABMiller could account for 29 percent of global beer sales, after selling a few assets to win regulatory approval.
Carlos Brito, chief executive of AB InBev, said yesterday the deal will build the world’s “first truly global brewer”.
The takeover would more than double Molson Coors’ revenue, which was $4.15 billion last year, cut costs by $200 million a year by 2020 and add about $1 billion in earnings before interest, taxes, depreciation and amortization. AB InBev already has about 14 per cent of the Chinese market. The newly merged company will be listed in Johannesburg, Mexico and Brussels. AB InBev and SABMiller will produce over a third of the world’s beers and have a significant advantage over rivals Molson Coors and Heineken.
Under British law, Wednesday was the deadline for Belgium-based A-B InBev to make a formal takeover offer for London-based SABMiller after going public with its intent to buy its rival in September.
“These guys have never failed in the past but this is a lot more hard, so we’ll see”, said Sanford C. Bernstein analyst Trevor Stirling.
In the past 12 months, there have been more than a dozen craft-beer mergers and acquisitions by larger breweries, including the US-based 10 Barrel, Blue Point, Elysian, and Goose Island by AB InBev; and the UK-based Meantime by SABMiller.
If the transaction goes ahead, SABMiller investors will choose between a cash offer of £44 per SABMiller share or stock in AB InBev.
“With little geographic overlap between the two companies it is of little surprise the deal has been agreed and the deal will also have limited anti-trust issues”.
“SABMiller has been an excellent partner for the past seven years and we are extremely proud of the organization that our teams have created”, said Mark Hunter, president and CEO of Molson Coors.
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SABMiller’s board of directors is recommending that shareholders accept the deal.
