SABMiller Courted by AB InBev for the 2015 Biggest Merger

Anheuser-Busch InBev has announced its willingness to acquire the British-South African beer maker SABMiller. Then if the proposal was accepted by SABMiller, we would attend the biggest M&A deal of 2015. The operation has already been assessed as one of the five largest takeovers since 1980 in terms of deal volume. Indeed the combination would create a colossus producing a third of the world’s beer and with a market value of around $275 billion.

AB InBev is the world’s largest brewer and has a 21 percent global market share; the company is the result of a number of M&A operations occurred over last 15 years. Nowadays AB INbev is headquartered in Belgium and listed on the Euronext Brussels stock exchange and on the New York Stock Exchange. Stella Artois, Corona and Budweiser are some of its main brands. The Belgian brewer has a strong predominance on both North America and South American areas, but it is poor in the African market, which is controlled by the rival SABMiller. That is the primary reason why, on 16th September, AB InBev has made an informal proposal to the world’s second-largest brewer, headquartered and listed in London. SABMiller has a strong presence in South Africa since it was born in this region in the late 1890s; some of its well-known brands are Peroni, BlueMoon, Castle.

For years this merger has been said impending, but now it seems to be much more likely because of the 15 percent drop in SABMiller’s share price since August, that makes the acquisition ‘cheaper’ for AB InBev. The Morningstar analyst Phil Gorham said “It’s exactly the moment they’ve been waiting for, it makes sense financially for the first time in years”.

SABMiller has been informed that AB InBev is willing to make a proposal but it has not received any details so far and according to UK rules guiding takeover, the bidder has to make the offer within October 14th, at 5pm. The Belgian headquartered firm is preparing a group of banks to finance the acquisition and the offer may come as soon as the package is ready, people familiar with the matter said.

As claimed by several analysts, a merger between these two enterprises can generate synergies up to $2.5bn thanks to cost reduction which has always been a focus of 3G Capital, a private equity group that is the second biggest shareholders in AB InBev, after Belgium Families. This is the reason why investors have reacted to the announcement positively leading to an increase of share prices of both SABMiller and AB InBev respectively by 22% and 11%.

However, there are several threats that could restrain a positive conclusion of the deal. The main source of uncertainty may come from the largest shareholders of  SAB: the tobacco group Altria and the Santo Domingo family that account for over the 40% of the company, but the former has signaled that it is open to consider the proposal depending on the terms.

As shareholders agreed to a takeover, the deal would face the scrutiny of regulators. The two companies globally account for 30% of the beer market. Moreover, in the US they would have a market share of 78% leading to some inevitable divestments. A combined group would suffer significant overlap also in China but here the market is not so consolidated yet, so remedies may not be imposed. Finally, even if an agreement is reached, there will be many partnership to be renegotiated, in particular the one that SABMiller has with Castel in Africa.

Claudia Laureti 

Andrea Maggioni

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