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Anheuser-Busch to Merge With SAB Miller

| published October 13, 2015 |

By Thursday Review staff

 

It would be one of the largest international mergers in history, and the biggest for beer drinkers worldwide.

After months of speculation, rumors, bids, counter-bids, and complex proposals, Anheuser-Busch has made an acceptable offer to SABMiller to create one of the world’s biggest companies.

The deal is reported to be worth about $106 billion. This would make the marriage of Anheuser-Busch and its closest rival Miller even larger than the proposed, but later doomed, mega-deal between U.S. cable giants Comcast and Time Warner—a merger plan which ultimately collapsed after more than a year of negotiations between the corporate parties, the federal government and various state regulators.

The Anheuser-SABMiller merger was finally agreed to after complex talks over the specific value of the deal, as well as how SABMiller stockholders and investors would be paid. Miller owners will be paid in part in cash, and in part in shares of both AB stock and stock in the newly combined giant.

The massive merger must still pass muster with regulators in the U.S., Britain and other countries. This issue has prompted another clause in the arrangement: if the deal fails because of regulatory concerns, a factor apparently discussed by SABMiller stockholders, Anheuser-Busch will pay Miller a roughly $3 billion penalty. It’s a valid concern for many of the parties involved, since according to some business reports, the Anheuser-Busch acquisition of SABMiller would be the fifth largest merger ever completed.

U.S. regulatory agencies such as the Justice Department and the Securities & Exchange Commission have already hinted that the deal will be subject to intense scrutiny. Both companies say they expect to be faced with spinning off some divisions and subsidiaries. Consumer advocates have already taken to social media and the internet to express concern that the newly merged giant will impose too much control on both supply and pricing in much of the world. There is also concern that the marriage will give too much power to one company to control the price of beer.

Both companies have been down this path before. In 2013, when Anheuser-Busch sought to buy control of Grupo Modela, regulators in the U.S. and Mexico required AB to divest itself of some of its subsidiaries and beverage ventures, such as Corona.

For both companies, the move is seen as a first-strike in the increasingly competitive battle between the major beer companies and the smaller, independent brewers and the highly popular craft beer segment. Though Anheuser-Busch and Miller are each vastly profitable, spending hundreds of millions each year on advertising—especially in televised sporting events—both companies have seen sales slump measurably as a result of the changing tastes of younger beer drinkers. Both companies have bought into the independent and craft beer market through smaller acquisitions.

Founded in 1852 by Eberhard Anheuser and August Busch, AB is headquartered in St. Louis, Missouri. It maintains major brewery operations in a dozen U.S. cities, including Fort Collins, CO, Jacksonville, FL, Los Angeles, CA, and Newark, NJ. In addition to dozens of beer brands, AB also produces bottled water, specialty beverages, and energy drinks. SABMiller, most commonly called just Miller Brewing in the U.S., was founded in 1855 with a corporate headquarters in Milwaukee, Wisconsin. In May of 2002, the British-South African-Australian multinational beer company, SAB, acquired Miller. After Coca-Cola and Anheuser-Busch, SABMiller is the third largest bottler of beverages in the world. SABMiller owns breweries and beer distributorships in more than 75 countries and on every continent. After Coca-Cola, it is considered the beverage company with the most global reach.

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