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Mergers and Acquisitions by Big Brewers: The SABMiller and AB Inbev Merger

26th Nov 2015

Last month we ticked over the 6th year of our beer club. While it’s no secret that craft beer is on the rise, if we had started our business in the 90’s we would have struggled as over 99% of beer drinking Australians were consuming mass produced beer. Even today craft beer only represents about 3% of the market, but it is growing.

In any market, if one part is in growth then typically another part is in decline. Currently, worldwide mass market beer is generally seeing reduced consumption and ultimately reduced sales. Not surprisingly it’s something large multinational brewing companies are trying to curb, mostly by launching new product lines among existing beer brands (XXXX Pale Ale), rebranding existing brands (Tooheys Old changing to Tooheys Old Dark Ale), or increasingly by acquisition of other beer companies.

Typically the acquisition process is a bigger fish buys out smaller a fish, however, over the last few weeks you may have read about one of the world’s largest proposed acquisitions involving two big fish operating in the beer world. AB InBev and SAB Miller, the worlds two largest brewing conglomerates have been courting each other in a ritualised negotiation dance. The first few offers were rejected but in mid October SAB Miller finally accepted AB InBev’s offer. As a bit of background AB InBev brands include the likes of Budweiser, Stella Artois and Becks, while SABMiller is the brewer behind brands such as VB, Coors and Peroni.

Some interesting facts about this merger/acquisition:

-The purchase price is $146 billion (AUD)… that’s $146,000,000,000

-The agreement was made “in principle” and they have set themselves a 1 month settlement date, however, this has already been extended by another week

-If the deal goes through the new entity will:

-own 1 out of every 3 beers sold worldwide

-account for approximately 50% of all the profits made from beer globally

-likely be headquartered in Belgium

-If the merger doesn’t get past regulatory or shareholder scrutiny, SABMiller will receive $4 billion (AUD) from AB InBevfor mucking them around.

-If the deal does go through various countries may impose specific regulations to ensure ongoing competition in the market. For example in the US some of MillerCoors beers like Miller Lite and Coors Light (which are partly owned by SABMiller) could fall into the hands of competitors.

We’ll be watching from the sidelines to see what it means for the global and Australian beer industry but its evident that mergers and acquisitions will continue to be part of the global beer landscape.