By Tripp Mickle
Anheuser-Busch InBev NV on Wednesday won approval for its $100
billion-plus takeover of rival SABMiller PLC, ushering in a new
world order for the beer industry.
Shareholders from both companies voted overwhelmingly in favor
of the acquisition, one of the largest in corporate history. AB
InBev will drop the SABMiller name and begin trading as a combined
company Oct. 11.
The deal fortifies AB InBev as a brewing powerhouse with an
estimated 46% of global beer profits and 27% of global volume,
lessens its dependence on the U.S. and gives it sprawling
operations across 17 African countries.
It also strengthens rival brewers who were able to scoop up
discarded pieces of SABMiller. AB InBev sold off dozens of brands
to gain regulatory approval for the deal, including Miller Lite,
Peroni and Snow, the world's top-selling beer.
The takeover is just the latest in a string of acquisitions for
the Budweiser brewer. Built through the 2004 combination of
Brazil's AmBev and Belgium's Interbrew, the company has now bought
four major brewers since 2008, including Anheuser-Busch Cos.,
Mexico's Grupo Modelo and Korea's Oriental Brewing.
In volume, the deal makes AB InBev more than double the size of
its closest rival, Heineken NV, which will have an 11% market
share, according to industry tracker Plato Logic.
The Belgian brewer's share of global beer profits will be four
times greater than Heineken, according to beer analyst Trevor
Stirling of Sanford C. Bernstein.
However, SABMiller comes at a steep price, Mr. Stirling said. He
estimates it will take about 10 years for AB InBev to recoup what
it spent on SABMiller, nearly five times as long as it took to
recover the $52 billion it spent on Anheuser-Busch in 2008.
AB InBev's pursuit of SABMiller began a year ago at a time when
Belgium-based AB InBev was struggling to revive Budweiser in the
U.S., its biggest market, and facing an economic downturn in
Brazil, its second-biggest market.
Acquiring SABMiller eases its reliance on those businesses by
adding operations in South America, Australia and Africa.
Africa, one of the last remaining growth markets for the beer
industry, will become 9% of revenue and a major focus at the
company. The region's beer volumes are expected to grow three times
faster than the rest of the world in the coming years, increasing
the continent's share of global volume to 8.1% by 2025 from 6.5% in
2014, according to AB InBev.
The biggest beer merger in history was marked by complexity from
the start, as AB InBev won over SABMiller's two biggest
shareholders -- tobacco giant Altria Group Inc. and Colombia's
Santo Domingo family -- by giving them a cash-and-share alternative
to the all-cash offer for other investors.
The cost of the deal rose as AB InBev sold off SABMiller assets
to appease U.S., European and Chinese regulators. Rivals were able
to pick up those businesses at attractive prices as AB InBev sought
regulatory approval.
In the U.S., AB InBev sold SABMiller's 58% interest in the joint
venture MillerCoors LLC to Molson Coors Brewing Co. The $12 billion
acquisition makes Molson, which previously owned 42% of
MillerCoors, the world's third-most profitable brewer, up from
fifth-most profitable, according to Sanford C. Bernstein.
Denver-based Molson overnight will become the U.S.'s
second-largest brewer with a 25% market share. It is poised to
challenge AB InBev, which has a 44% market share.
At a beer distributor conference Monday in Chicago, MillerCoors
Chief Executive Gavin Hattersley said the company would attack AB
InBev's top-selling Bud Light brand with a series of advertisements
that begin airing Sunday. The ads will call out Bud Light, claiming
it combines more calories and less taste.
"We've talked a lot about getting back to growth. That's our
mantra," Mr. Hattersley said.
In Europe, AB InBev agreed to sell global rights to the Italian
beer Peroni and Dutch beer Grolsch to Asahi Group Holdings Ltd. The
Japanese brewer plans to use the European beers to help bolster
international distribution of its flagship Asahi brand and expand
its business outside Japan, where a shrinking, aging population
limits growth.
In China, AB InBev agreed to sell SABMiller's Chinese beer
business to China Resources Beer Holdings Co. The Chinese brewer
agreed to pay $1.6 billion for the business, about half the fair
value of the company, according to Mr. Stirling.
The deal gives government-controlled China Resources SABMiller's
interest in Snow, the world's best-selling beer by volume and a 30%
market share in the country. But the company has struggled in
recent years as young Chinese drinkers shift to wine and liquor
from beer.
China Resources will look to reverse that trend at the same time
AB InBev, which retains an 18% market share in China, continues to
push higher-priced beers like Budweiser, along with Harbin, a local
brew.
After the deal closes, AB InBev is expected to move forward with
the sale of additional European brews, including Pilsner Urquell,
according to deal advisers. It agreed to sell SABMiller's
businesses in Hungary, Romania, Czech Republic, Slovakia and Poland
to gain European approval. Combined, they accounted for about $2.3
billion of SABMiller sales, according to Exane BNP Paribas
analysts.
AB InBev recognizes the deal could embolden rivals. Speaking to
its U.S. distributors at its own Goose Island brewery in Chicago on
Tuesday, AB InBev Vice President of U.S. Sales Alex Medicis said
the company had beat its biggest competitor, MillerCoors, in
sales-to-retailers for 11 consecutive quarters. He compared the
competition to a foot race.
"This is not a boxing fight," Mr. Medicis said. "We need to keep
running and keep running faster."
--Denise Roland contributed to this article.
Write to Tripp Mickle at Tripp.Mickle@wsj.com
Corrections & Amplifications: Anheuser-Busch InBev NV is the
maker of Stella Artois. A photo caption in an earlier version of
this article incorrectly stated that it was an SABMiller brand.
(END) Dow Jones Newswires
September 29, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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