US to put measures for AB InBev’s SABMiller takeover
THE US Justice Department was poised to approve Anheuser-Busch (AB) InBev’s takeover of SABMiller in an agreement that might include measures to keep the beer behemoth from edging craft brewers from shelves, said sources familiar with the matter.
US clearance of the $107 billion (R1.7 trillion) combination was on track for later this month, according to the three sources. The accord could include limits on the combined firm’s ownership of distributors, said one of the sources.
US antitrust approval would bring the maker of Budweiser a step closer to completing the industry’s biggest merger and redraw control of the global beer market. The merged company would be followed by Heineken and Molson CoorsBrewing in the second and third spots by market capitalisation. Following divestitures to win regulatory approvals, the deal would keep Budweiser, Beck’s and Stella Artois under AB InBev’s roof, while selling brands including Miller in the US and Peroni and Pilsner Urquell in Europe.
AB InBev rose 0.5 percent to close at €114.40 (R1 993), after rising 1 percent earlier in Brussels. SABMiller gained 0.6 percent in London to £43.20 (R973).
The merger, which the firms reached last November, has won antitrust approval in more than a dozen jurisdictions, including the EU.
This week South Africa’s Competition Commission recommended the deal with conditions, including a sale of SABMiller’s stake in local drinks producer Distell Group. AB InBev is still seeking approval in China, where it has agreed to sell SABMiller’s stake in Snow Breweries to joint-venture partner China Resources Beer. AB InBev took an aggressive approach in offering up asset sales to smooth approvals in an tough antitrust environment, said Andre Barlow, an antitrust lawyer at Doyle Barlow & Mazard. Other proposed mergers have fallen apart in recent months after challenges by US antitrust officials, including Halliburton’s bid for Baker Hughes and Staples’s attempt to take over Office Depot.
“Right off the bat they came in with structural remedies and that speeds the process along,” said Barlow. The Justice Department still should be concerned about protecting competition from craft brewers, he added, by requiring changes to AB InBev’s incentives to distributors.
In the US, AB InBev reimburses wholesalers for marketing expenses on a sliding scale based on the percentage of its brands that are distributed, with those who sell 95 percent or more of AB InBev brands getting the biggest payouts.
Those rewards effectively curb the sale of competing beers, according to the Brewers Association, which represents 2 800 craft brewers. That system was at the heart of concerns raised by small brewers who complained about the incentives and AB InBev’s ownership of wholesalers.
“If you want to grow your business as a craft brewer, if you want to get your beer into a chain store, if you want to get your beer into the stadium, you need to use the (AB) distributor or the MillerCoors distributor,” said Bob Pease, the association’s chief executive. “Those are the only two options in most markets that have the horsepower to effectively bring your beer to the retail market.”
Spokesmen for the companies and the Justice Department declined to comment. The Brewers Association has demanded the combined firm divest its wholesalers and change incentives to encourage the sale of competing beers. The smaller brewers did not appear to be getting much traction in meetings with Justice Department officials.
Most of the resources in the section reviewing the deal were dedicated to investigating the two pending mergers in the health-insurance industry – Anthem’s bid for Cigna and Aetna’s deal for Humana – another source said.
The merging companies offered to sell SABMiller’s stake in the MillerCoors joint venture to Molson Coors, ceding global control of Miller brands, to resolve antitrust problems in the US. That makes it harder for the brewers to argue about competitive harm from the merger because AB InBev’s position in the US will be essentially unchanged.
AB InBev chief executive Carlos Brito told lawmakers last December that distribution would not change as a result of the takeover.
He committed to limiting the volume of beer distributed by wholly owned distributors to “around” 10 percent from between 7 percent and 8 percent.
Brito said there was no penalty for a wholesaler that carries non-AB InBev brands, adding that the incentive programme had been revised to make wholesalers eligible “to receive benefits” regardless of how many competitive brands they carry. He also said there would be no termination of any distributor or renegotiation of contracts with distributors. – Bloomberg