Anheuser-Busch InBev eyes takeover of rival SABMiller
Anheuser-Busch InBev, the world’s largest brewer, is exploring a takeover of rival SABMiller in a deal that would create a $275bn company responsible for one out of every three beers produced globally.
A tie-up between the owner of Budweiser and Stella Artois and the group behind Peroni and Grolsch would rank as one of the six largest takeovers in history and the biggest in a year that was already the strongest for blockbuster deals since 2007.
It would mark the latest stage of a remarkable consolidation in the global brewing industry driven by a group of Brazilian investors led by Jorge Paulo Lemann. They are also the founders of 3G Capital, the Brazilian private equity group, which has been buying up US food companies including Heinz, Kraft and Burger King, sometimes with the support of serial investor Warren Buffett.
A series of deals over the past decade have transformed AB InBev and SAB into the world’s two biggest brewers and the two — along with Heineken and Carlsberg — make half the world’s beer.
Ironically, the industry has consolidated just as consumer tastes in beer are fragmenting. The big brewers face a growing challenge from craft beer, popular with millennial and younger drinkers who reject what they perceive as the bland offerings of the big multinationals.
SABMiller said on Wednesday it had been informed that AB InBev intended to make a bid proposal for the company but it had not received any such proposal or details about its terms.
“The board of SABMiller will review and respond as appropriate to any proposal which might be made,” it said in a statement after the Financial Times told the company it intended to report the approach.
AB InBev’s bold dreams of expansion originated with Jorge Paulo Lemann, the group’s single biggest shareholder
The FT’s management editor examines how the Budweiser brewer has sharpened its takeover and integration tactics
Under rules guiding takeovers in the UK, AB InBev has until 5pm on October 14 to make a firm offer to SABMiller.
AB InBev later confirmed that it had made an approach, saying its intention was “to work with SABMiller’s board toward a recommended transaction”.
Shares in SABMiller closed up 20 per cent to £36.14 in London, giving it a market capitalisation of £58.5bn ($90.7bn). SABMiller has net debt of about £7.5bn. AB InBev shares closed up 6 per cent at €100.5, giving a market capitalisation of €161.6bn ($182.6bn).
chart: Global beer market share
AB InBev is hoping to engage the management of SAB in a friendly transaction, said people familiar with the matter.
It is being advised by Lazard, the independent investment bank, and law firm Freshfields. SAB is working with advisers at Robey Warshaw, JPMorgan Chase and Morgan Stanley, as well as lawyers at Linklaters.
It is unclear whether SAB, which counts the tobacco company Altria and Colombia’s Santo Domingo family as its largest shareholders, is interested in pursuing a deal. On Tuesday it emerged that Altria, which has a 27 per cent stake in SAB, had cancelled two appearances this week at consumer goods conferences hosted by BofA Merrill Lynch and Stifel, fuelling speculation that SAB might be in play.
Hard-nosed kings of beer
Working for the world’s largest brewer is not to everybody’s taste — and that is fine with Carlos Brito, Anheuser-Busch InBev’s chief executive.
Read more
Given the size of the two companies, AB InBev would have to agree to divestitures in order to obtain regulatory approval for a deal in multiple countries, including the US and China.
SABMiller has a near-30 per cent share of the US beer market through MillerCoors, its joint venture with Molson Coors. It also has 23 per cent of China’s beer market through a joint venture with China Resources Enterprise, known as CR Snow, while AB InBev has a 15 per cent share of the Chinese market.
Trevor Stirling, analyst at Bernstein said: “The US Department of Justice would almost certainly insist on the disposal of SAB’s stake in MillerCoors in the USA. And ABI might also have to dispose of SAB’s 49 per cent stake in CR Snow in China. But it is also likely that Molson Coors and CRE would be willing purchasers respectively.”
People who have studied a potential tie-up between AB InBev and SAB in the past said AB InBev would be ready to sell SAB’s stake in the joint venture with Molson Coors.
Mr Lemann’s first foray into beer came in 1989, when he and his partners acquired control of Brahma, a Brazilian brewer. Ten years later Brahma took over Antarctica, Brazil’s biggest brewery, to create Ambev, which supplied Mr Lemann with the firepower to acquire Belgium’s Interbrew in 2004, creating InBev. The last blockbuster acquisition was the $52bn deal with Anheuser-Busch of the US that led to today’s AB InBev.
Fitch, the rating agency, has noted, an AB InBev-SABMiller merger “would create a global player, thus further widening the gap with rivals Heineken and Carlsberg. It would be exposed to high growth and profitable markets and would require only limited divestments in relation to market overlaps”.