Anheuser-Busch Aims To Convince Miller That This Merger’s For You

By Hamsa Mahendranathan

After years of speculation that two beer giants will tie the knot, Anheuser-Busch InBev has disclosed its intention to acquire SABMiller.

This acquisition would combine the world’s two largest brewers by revenue, which together have $69 billion in annual revenue and command 30% of global beer sales.  Anheuser-Busch’s brands of beer include Budweiser, Corona, Stella Artois Hoegaarden and Skol.  SABMiller’s offerings include Miller Lite, Aguila, Peroni and Pilsner Urquell.  In the United States, SABMiller owns 58 percent of the MillerCoors joint venture which has the right to market Coors in the U.S.

Large breweries have seen their sales fall as customers in established markets have shifted their consumption to wines and craft beers.  For Anheuser-Busch, the deal is an opportunity to solidify its presence in existing markets, expand its global reach and grab SABMiller while it is relatively cheap.  SABMiller’s share price has fallen recently, and it continues to have a strong presence in markets where Anheuser-Busch has little or none, such as Africa, Colombia and Peru.

Anheuser-Busch has until October 14 to make a formal offer under British takeover rules, and reports indicate that SABMiller’s board will reject the initial offer.  SABMiller may even seek a deal with another brewery.  Last year, SABMiller failed in its attempt to buy Heineken, and commentators have suggested that SABMiller will have difficulty finding another target.  Trevor Stirling of research firm Sanford C. Bernstein has opined that “If that deal was out there, they would have done it already.”

Although the deal is still uncertain, it is clear that it would come under serious antitrust scrutiny in the U.S., where the companies control about three-quarters of the beer market, and also in China.

The resulting company may have to sell its stake in MillerCoors in the U.S. and in CR Snow, the largest brewery in China.  Ankur Kapoor, an antitrust specialist and partner at Constantine Cannon, likened the potential deal to a fictional merger between GM, Ford and Chrysler.  He commented that “Without a divestiture, I think there’s little or no chance for a deal.”

– Edited by Gary J. Malone