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Tag: SABMiller

  • One of the final hurdles for biggest beer deal almost cleared

    One of the final hurdles for biggest beer deal almost cleared

    Anheuser-Busch InBev’s $107bn acquisition of SABMiller is nearing Chinese approval after the companies agreed to divest the maker of Snow beer, the world’s top-selling brand, according to people familiar with the matter.

    Approvals for both transactions could come as soon as this month based on typical review timelines, clearing one of the final hurdles for the biggest beer deal in history.

    DEBT BREWING: AB InBev agreed to buy SABMiller in October for about $110bn. Picture: REUTERS

    Though China’s Ministry of Commerce may attach some conditions to the deal, including the Snow divestiture, regulators see no major hurdles, said one of the people, asking not to be identified because the deliberations are private. Some local beermakers told the ministry that they don’t object to the takeover as it won’t have a big impact on the Chinese market, another person said.

    SABMiller shares closed up 3 pence to £43.06 in London, erasing an earlier decline. AB InBev shares fell less than 1% to €114.95 in Belgium.

    The merged company would redraw control of the global beer market. Following divestitures, the deal will keep Budweiser, Beck’s and Stella Artois under AB InBev’s roof, while ceding control of brands including Miller in the US and Peroni and Pilsner Urquell in Europe.

    In China, the companies agreed to sell SABMiller’s 49% stake in its joint venture with China Resources Beer, which controls Snow beer, back to its partner.

    Deals unravelled

    In clearing these global hurdles, the beer megadeal contrasts with other big proposed tie-ups that unravelled amid antitrust scrutiny, including Halliburton’s failed bid for Baker Hughes, Staples’s foiled merger with Office Depot and General Electric’s decision to abandon the sale of its appliance business to Electrolux. In the beer deal, the sides were aggressive in offering divestitures from the start — including the plan for SABMiller to sell Snow — which may have ultimately helped reduce regulatory resistance, antitrust lawyers have said.

    The US Justice Department may clear the tie-up as soon as this month, people familiar with the process have told Bloomberg News. SA has yet to bless the deal, which has hit some obstacles amid protests from local unions.

    AB InBev and SABMiller declined to comment. China Resources and the commerce ministry didn’t immediately respond to queries.

    The merger plan, which the two companies reached in November as a way to gain access to emerging markets, has already won antitrust approval in more than a dozen jurisdictions, including the European Union.

    In March, China Resources announced it would buy out SABMiller’s stake in their Chinese venture for $1.6-billion. That deal is also nearing approval from China’s commerce ministry, the people said.

    In the US, AB InBev has agreed to sell SABMiller’s stake in the MillerCoors joint venture. It may also have to agree to further conditions related to beer distribution, according to people familiar with the matter. Smaller brewers and wholesalers want officials to restrict AB InBev’s control and influence over how beer gets on to store shelves, according to the people.

     

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  • AB InBev sells SABMiller’s stake in Chinese brewer

    AB InBev sells SABMiller’s stake in Chinese brewer

    The world’s top brewer, Anheuser-Busch InBev, has agreed to sell SABMiller’s stake in China’s leading beer maker to the local partner for $1.6bn, as part of a mega-merger between the giants.

    China Resources Beer (Holdings) Co will buy the 49% stake in Snow Breweries, its joint venture with SABMiller, it said in a statement to the Hong Kong stock exchange, where it is listed.

    It said the deal would go through “as soon as practicable” after AB InBev, a Belgian-Brazilian company, takes over SABMiller.

    AB InBev announced in November last year that it would buy SABMiller for $121bn — the third-largest acquisition in history — creating a juggernaut that brews three times as much beer as its nearest rival.

    Analysts said the sale appeared aimed at persuading Chinese regulators to sign off on the deal.

    AB InBev aims to complete the SABMiller takeover by the end of this year, and said last month the plans were on track.

    “After the acquisition deal between AB InBev and SABMiller, their market share in China would have exceeded 40%. This may not pass the antitrust survey by the ministry of commerce, so AB InBev had to sell the stake,” Guotai Junan Securities analyst Song Tao said.

    The Snow Breweries venture, set up in 1994, has a market share of about 24% in China and operates 98 plants across the country, according to SABMiller, which describes the venture’s Snow product as the world’s biggest beer brand.

    AB InBev already has a presence in China with a 15.9% domestic market share and 39 beverage plants as of 2014, according to the company.

    But analysts said that shedding the Snow Breweries holding was a setback for the newly formed entity in the world’s biggest beer market, while China Resources Beer — part of the massive conglomerate China Resources — loses a strong foreign partner, leaving it weak in the premium segment.

    “Losing the Snow Breweries stake has a huge impact on the foreign brand because it will lose the price negotiation advantage it used to have with raw material suppliers and the scale-of-production advantage from the factories,” said Stacey Yu, an analyst at consultancy Business Connect China.

    Analysts said competition was expected to intensify in the Chinese beer market, where growth was slowing in the face of economic headwinds.

    “Without one company dominating the market and enjoying increased pricing power, the beer market will remain fiercely competitive,” Mr Song said.

    AB InBev has acquired or formed partnerships with a number of leading Chinese brewers and doubled its China business in 2006 by acquiring Fujian Sedrin Brewery.

    At 10.10am,

    SABMiller shares were up 0.49% at R925.74 at 10.10am on the JSE, valuing the company at about R1.8-trillion, while AB InBev had added 1.26% to R1,792.31, valuing the company at about R2.8-trillion.

    In Hong Kong, shares in China Resources Beer jumped 25% to their highest level in five years, regaining ground lost so far this year after the stock was dropped from the main constituents in the Hang Seng index.

     

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  • InBev-SABMiller tie-up would include China’s biggest beer

    InBev-SABMiller tie-up would include China’s biggest beer

    A potential prize for AB InBev in its bid for SABMiller is a Chinese beer that is the world’s biggest seller. But any deal will face Chinese regulators who have barred the two brewing giants in the past from cooperating.

    China already drinks one-quarter of the world’s beer and is the focus of intense foreign interest because even with its economy cooling, demand is growing while Western markets are flat or declining.

    SABMiller has a leading position with a 49 percent stake in Snow, a joint venture with a state-owned partner that sold 11.8 billion liters (3 billion gallons) of suds last year, or more than one out of every 20 glasses drunk worldwide. That could dramatically expand InBev’s Chinese footprint, which already includes Budweiser, Beck’s and Stella Artois.

    “No one outside China knows what Snow is, but it is the biggest brand in the world,” said industry analyst Spiros Malandrakis of Euromonitor.

    Total Chinese beer sales are expected to rise 2.6 per cent this year to 52.2 billion liters (13.6 billion gallons), or more than double the global forecast of 1 per cent growth, according to Euromonitor.

    Competition in China’s crowded beer market is intense, which keeps prices low and profits slim.

    Despite that, global brewers are buying or launching mass-market brands. Some hope to attract Chinese drinkers who might trade up to more expensive versions as incomes rise.

    In China since 1984, InBev’s Anheuser-Busch unit, brewer of Budweiser, has 39 beverage plants and 26,000 employees.

    SABMiller launched Snow with China Resources Enterprise, Ltd. in 1994. Today, it has 98 breweries and says it accounts for more than one in every five cans or bottles of beer sold in China.

    Other competitors include Heineken and Carlsberg, Japan’s Kirin and Asahi and Chinese brands Tsingtao and Yanjing.

    In a reflection of competitive pressure, it was only last year that SABMiller said it collected its first half-year dividend of $228 million from the Snow partnership.

    If Belgian-based AB InBev wants to keep that business, it needs to win over Chinese anti-monopoly regulators who have singled out both companies for curbs on their activities to preserve competition.

    As a condition of Chinese approval for its 2008 purchase of Anheuser-Busch, InBev was barred from linking its brands with SABMiller. Those also include domestic beers Harbin, Sedrin and Double Deer.

    Both also are prohibited from buying any more Chinese breweries.

    A merged company would control more than 40 per cent of China’s beer market, according to Song Tao, an analyst for Guotai Jun’an International, a Chinese brokerage.

    “That may trigger an anti-monopoly investigation,” said Song. “If the deal fails to get passed, InBev has to sell its holdings in CRE. Then CRE will face competition from InBev, and their future will become unclear.”

    Mergers between rivals in China run counter to the ruling Communist Party’s desire to make the economy more productive by promoting competition.

    China didn’t enact its first anti-monopoly law until 2007 but regulators have enforced it aggressively.

    In 2009, they blocked Coca-Cola Co. from buying a Chinese fruit juice maker, Huiyuan. Regulators said even though Coke had no fruit juice brand, adding Huiyuan to its popular carbonated drinks might hurt competition in beverages overall.

    Companies that want to merge are required to notify regulators if their combined annual revenue would exceed 2 billion yuan ($310 million) and each did more than 400 million yuan ($64 million) in business the previous year, according to Song Ying, an anti-monopoly specialist for the Anjie Law Firm in Beijing.

    “The Ministry of Commerce will consult with some of the main stakeholders in this industry and maybe the relevant industrial associations to ensure that the potential merger deal will not put restrictions on market competition or raise the barriers to entry,” said Song.

    At the same time, brewers are scrambling to adapt as Chinese drinkers join their Western counterparts in migrating to craft beers.

    Already, specialty brews including Stella, Hoegaarden and Belgium’s Chimay and Duvel priced at up to 37 yuan ($6) a bottle are sold in supermarkets in major Chinese cities.

    “This highlights the speed of the sophistication of the Chinese palate,” said Malandrakis of Euromonitor.

    For a global brewer, he said, that means taking over a popular but low-profit brand such as Snow would be part of a strategy to guide Chinese drinkers to more expensive varieties.

    “Essentially the consumers would drink Snow for a couple of years,” he said. “And then when they move into the middle class, they would switch, the company hopes, to imported beers from its brands.”

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