AB InBev/SABMiller: what it means

13 October, 2015

The combination of Anheuser-Busch InBev NV and SABMiller Plc would sell one out of every three beers brewed worldwide, and reap about half of the beer industry’s profits, according to Bloomberg News.

The Bloomberg team of Sam Chambers and Matthew Boyle have looked at the proposed deal and come up with these findings.

They said: “AB InBev relies heavily on sales in North America and South America. That’s problematic, analysts say, as US sales of mainstream brands such as Budweiser and Bud Light have fallen for several years as tastier craft beers gain more drinkers.”

In Brazil, AB InBev’s second-biggest market, beer shipments declined 8.6% in its most recent quarter. There, growth has been stunted by weakening consumer sentiment and rising inflation.

The Bloomberg team said: “Buying SABMiller would diversify the Budweiser maker’s portfolio. AB InBev would gain access to more than $7bn in African revenue, from brands such as Castle Lager and Carling Black Label.

“SABMiller generates almost a third of its revenue and profit from Africa, the world’s fastest-growing beer market. About 65 million Africans are due to reach the legal drinking age by 2023. AB InBev would like to serve them a Budweiser.

Here’s what the Bloomber team think the combined company might look like:

About 30% of SABMiller may need to be sold to satisfy antitrust regulators, according to Pablo Zuanic, an analyst at Susquehanna Financial Group LLP. The most obvious candidate for divestment is SABMiller’s 58% stake in the MillerCoors joint venture in the US, where AB InBev is already clear market leader.

Analysts at Nomura estimate it would probably cost partner Molson Coors Brewing Co. more than $10bn to buy out the venture.

At least four other businesses are likely to be jettisoned, with the next being China Resources Snow Breweries Ltd., a joint venture with China Resource Enterprises that sells beer brands including Snow, the world’s top-selling beer by volume.

SABMiller’s 49% stake could be worth as much as $5bn, according to Nomura’s Edward Mundy. AB InBev should try its hardest to reach a deal with the Chinese government that would allow it to keep the stake in Snow, Zuanic said.

Keywords: beer, sabmiller, ab inbev




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