Anheuser-Busch to offer $106bn for SAB Miller

Anheuser-Busch InBev (AMIN), the largest brewery company in the world, is all set to make an initial bid close to $106bn (£70bn, €95bn) to acquire Britain-based SAB Miller (SAB), the second-largest brewery company in the world. A possible merger could give Anheuser InBev control over almost one-third of global beer volumes.

SABMiller had confirmed in a public statement on 16 September that Anheuser InBev intended to make a proposal for acquisition. The company said no proposal had yet been received, and revealed no further details about the terms of any such proposal. According to Reuters, the first bid could be made as early as 28 September (Monday).

As of 2014, Anheuser InBev had a combined global share of 20.8% of the beer market while SABMiller had 9.70%. If the deal goes through, Anheuser InBev will rule the global beer market with an estimated 30.5% market share. Some of the most popular brands of beer under Anheuser InBev are Budweiser, Busch, Corona, Hoegaarden, Leffe and Stella Artois, while Miller, Fosters, Peroni, Castle are some of the best known brands under SAB Miller.

According to a Forbes report, the current combined market cap of Anheuser InBev is £135bn (€182bn, $204bn), almost double the market capitalisation of SABMiller which is £58bn (€78bn, $87bn). While SABMiller is listed on the London and Johannesburg stock exchanges, Anheuser InBev is listed on Euronext and the NYSE.

Anheuser InBev's buyout of SABMiller has been a matter of speculation for some time now but could not materialise due to the debt burden of Anheuser InBev which it took to finance multiple mergers and acquisitions in the last few years. Anheuser InBev was formed following acquisition of American brewer Anheuser-Busch by Belgian-Brazilian brewer InBev, which in turn was a merger of AmBev and Interbrew. While the Anheuser Busch and InBev acquisitions cost the company a total of £34bn (€46bn, $52bn) in 2008, for the earlier acquisition of AmBev–Interbrew the company had to shell out £7.5bn (€10bn, $11.5bn) in 2004.

Regulatory hurdles

Agreeing on the sale price will not be the only difficult task. Given the global presence both the companies have, they will have to get regulatory clearances from all associated authorities as well. According to a Bloomberg report, SAB Miller will have to exit its various joint ventures. Among them are its JV with Molson Coors Brewing Co, called MillerCoors in the US, a stake in CR Snow in China and a minority stake in French liquor company Groupe Castel.

The acquisition of SABMiller will be crucial for Anheuser InBev as it looks to spread its reach to emerging and growing markets from the already established and somewhat declining ones. SABMiller dominates the beer industry in Africa and Latin America with over 30% of its revenues coming from there led mainly by South Africa in the last fiscal year. Anheuser-Busch InBev, on the other hand, has negligible footprint in a market like Africa, and this acquisition could drive that growth. Sanford C Bernstein analyst Trevor Stirling in an interview to the Wall Street Journal commenting on a possible deal said: "By acquiring SABMiller, Anheuser-Busch InBev would be buying growth in Latin America and in Africa and buying the opportunity to take a lot of cost out of SAB's back office operations."