As of Tuesday October 13th, British-based brewer SABMiller (LON: SAB) has "in principle" accepted a $104 billion takeover deal from Belgian-Brazilian Anheuser Busch InBev (NYSE: BUD). The union of the two will create the largest beer company in the world, with expected annual sales revenue of $73.3 billion, combining top Unites States brands such as Miller Genuine Draft and Budweiser. Prior to the deal, AB InBev controlled approximately twenty-five percent of the global market share; the new, unified company will control approximately thirty percent. Heineken (AMS: HEIO), the next runner-up, will control only nine percent.
The takeover has consumers apprehensive over price increases as well as a lack of choice in their beer. Uniting the largest and second-largest companies in the brewing business likewise has regulators concerned that the resulting behemoth will suppress competition. The deal is expected to face worldwide antitrust analysis. Craft brewers and other small independent businesses are worried that it will become more difficult to get their beers sold in stores. AB InBev already owns six of the world's most popular brands, including Budweiser, Stella Artois, and Beck's. SABMilller produces Miller Genuine Draft, Peroni, and Milwaukee's Best, among others. AB InBev controls 45% of the essential United States' market share, and SABMiller controls a further 25%. AB InBev is therefore predicted to sell MillerCoors-most likely to Molson Coors, which already has a 42% stake in the company-to appease the US government.
AB InBev faces similar regulatory challenges in China, where it has 14% market share. SABMiller may be forced by Chinese authorities to exit its joint venture with China Resources Enterprise LTD. The latter produces the bestselling Snow brand and holds 23% of the market. The European and Latin American markets, however, offer fewer obstacles. The greatest growth in the beer market in the coming years is expected to come largely from Africa. By acquiring SABMiller, AB InBev plans to expand into Africa, as well as Australia, in the face of a lagging US market.
As young consumers turn in larger numbers towards independent beer makers, large companies have been attempting to preserve their market share by taking over more and more small businesses. AB InBev has been snapping up other beer companies for years, acquiring Elysian Brewing (based in Seattle), 10 Barrel Brewing (based in Oregon), and Goose Island (based in Chicago). However, SABMiller was reluctant to accept an offer from AB InBev. The London-based brewer turned down previous five offers, the first of which valued each SABMiller share at $58, claiming that AB InBev was undervaluing their company. If the $104 billion takeover is completed, it will be the largest beer deal in history as well as one of the top five acquisitions ever made.