- The Justice Department greenlighted the roughly $108 billion merger of Anheuser-Busch InBev and SABMiller PLC Wednesday, one of the largest corporate mergers to date. The combined entity would be the world’s largest beer company, controlling about 30% of the global market.
- The settlement includes several conditions that prevent a concentration of ownership within the U.S. beer industry. AB InBev must divest SABMiller's entire U.S. business, including SABMiller's portion of joint ownership of MillerCoors, the right to brew and sell SABMiller beers in the U.S., and worldwide rights to the Miller beer brand.
- AB InBev also agreed not to do anything that could inhibit independent distributors' ability and incentive to sell rival brands, like craft and import beers. Also, AB InBev cannot acquire beer distributors or brewers without regulatory approval focused on potential competitive effects.
This deal has already received approval in a number of other key markets, including Europe, South Africa and Australia, which leaves just two hurdles left to overcome: China and SABMiller shareholders.
However, analysts expect Chinese approval of the deal after AB InBev agreed to other concessions earlier this year, including selling SABMiller’s 49% interest in the joint venture CR Snow. AB InBev announced the deal in March, which gives the state-owned China Resources Beer Holdings Co. full control over Snow, China’s largest beer and the world’s No. 1-selling beer by volume.
The SABMiller acquisition, which AB InBev said it expects to close in the second half of the year, comes at a critical time. In its latest earnings report, AB InBev’s quarterly revenue fell to $9.4 billion from $10.45 billion since last year, missing analysts’ estimates. The company took a major hit in the Brazil market, where it lost market share and volumes fell 10%.
At the same time, competitors ranging from small craft brewers to Constellation Brands are boosting sales. Constellation reported a 15% increase in net sales in the latest quarter, following a 13.8% increase in the previous quarter.
AB InBev began snapping up craft brewers through acquisitions for its craft and import brand division, The High End. These include Devil’s Backbone Brewing in April as well as a number of acquisitions announced at the end of 2015. AB InBev also launched an accelerator, Techstars Connection, as a partnership between Techstars and AB InBev’s venture arm, ZX Ventures.
Craft brewers may also find relief in AB InBev’s agreement to not hinder craft beer distribution, which was a major concern from the outset of the SABMiller deal.
AB InBev has also begun looking into related markets for sales growth opportunities, including hard soda under its Best Damn Brewing line, low- and non-alcoholic beers, a partnership with Starbucks to manufacture and distribute its RTD Teavana brand in the U.S., and bringing more Mexican beers to the U.S. market to compete with Constellation.