AB InBev SABMiller Deal: Beer Deal Reached

Published: October 14, 2015

AB InBev SABMiller Deal: Beer Deal Reached, One of the biggest M&A deals is in the pipeline as drinks giants Anheuser-Busch InBev, and SABMiller agreed in principle to a £69-billion ($104 billion) all-cash deal that will shake up the global drinks industry.

A day before the expiry of a deadline for talks on the deal, the two companies said they had reached an agreement under which SABMiller shareholders would receive £44 per share in cash — a premium of around 50 per cent to the London-listed drinks makers on September 14, the day before news of the deal broke.

SABMiller, which had turned down AB InBev three times in the past month on the grounds that the deal being offered significantly undervalued the company, said that the board was prepared to unanimously recommend the offer to SAB shareholders. AB InBev had originally offered £29.34 per share.

The deal is subject to conditions, including the approval of major shareholders on both sides and due diligence.

Should the deal fail to get the approval of AB InBev shareholders or regulatory authorities, AB InBev would be liable for a $3- billion break fee.

The deal would bring together two of the giants of the industry — SAB Miller, a beer and soft drinks business, whose brands include Fosters, Peroni and Grolsch, employs around 69,000 people across the world, including Australia, Columbia, Czech Republic, India and South Africa. In the year to March it generated an EBITDA of $6.3 billion.

AB InBev, whose brands include Budweiser, Corona, Stella Artois and Beck’s, employs around 155,000 people, and in the full year 2014 reported an EBITDA of $18.5 billion.

SABMiller has ten breweries across India, while AB InBev had begun to build a presence in the country, after taking full control of a venture it jointly owned with RJ Corp earlier this year.

In a presentation setting out the rationale for the deal earlier this month, AB InBev pointed to the fact that the two had a complementary geographic footprint — with SABMiller’s strong position in Africa, Australia, Eastern Europe, China, India and central South Africa, and AB InBev’s position in Canada, South America and Europe.

However, with both companies having a major presence in some markets, disposals will have to happen if the deal goes ahead.

“There are several places where there are regulatory issues — the most clear are the US and China, but we also have other places in Western Europe — where they may be forced to sell some brands, and potentially in Eastern Europe and Russia,” says Javier Gonzalez Lastra, an analyst at Berenberg.

He said that given AB InBev’s small presence in India, unless individual states expressed concerns, difficulties were unlikely.

“There will be a few disposals around the world, creating opportunities for those that can pick up those assets, given that they will be forced sellers.”


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