AB InBev’s proposal to take over SABMiller was agreed in principle on October 13. However, the deadline set by UK regulators to formalize the deal was pushed back multiple times as the brewers discussed the details.
The new entity will control around 30% of beer volumes, and the need to meet regulatory approval (particularly in the US and China) is a key issue in its formation.
‘Game-changer’ for Molson Coors in the US
In a transaction valued at $12bn, SABMiller’s 58% stake in MillerCoors will be sold to Molson Coors. The agreement is conditional on AB InBev’s acquisition of SABMiller, which is expected to complete in the second half of next year.
MillerCoors was created in 2008 as a joint venture in the US by SABMiller and Molson Coors, with Molson Coors currently holding a 42% stake. By purchasing SABMiller’s stake, Molson Coors will gain full control of the operations, and retain the rights to all the brands in MillerCoors US portfolio. This includes Redd’s and import brands such as Peroni and Pilsner Urquell.
Mark Hunter, president and CEO for Molson Coors, described the deal as a ‘game-changing opportunity’ for his company. While it will strengthen Molson Coors’ position in the US beer market, the acquisition of the global Miller brand rights will also strengthen its international beer portfolio thanks to powerful American branding, he added.
‘Proactive’ approach to regulatory concerns: AB InBev
As per the agreement made in principle last month, SABMiller shareholders will be entitled to £44 per share in cash, with a partial share alternative. The figure of £44 per share is around 50% up on SABMiller’s share price before renewed speculation about an approach from AB InBev began (£29.34 on September 14).
While Molson Coors will see its operations in the US strengthen, AB InBev CEO Carlos Brito said his eyes were set on creating ‘the first truly global beer company’ and in particular one that will bring more choices to beer drinkers in markets outside of the US.
“We are pleased to have reached this agreement with Molson Coors to divest SABMiller’s US assets; and we will continue to proactively address any regulatory concerns in other relevant markets,” he said.
AB InBev notes that its acquisition of SABMiller will strengthen its position in key emerging regions: with Asia, central and south America, and Africa identified as holding strong growth prospects.
It also believes the combined group can reach significant cost savings, which it emphasises could not have been achieved alone. It estimates around $1.4bn (almost £1bn) can be saved per annum.