Beer giants SABMiller and AB InBev to join hands to face industry challenges

The world’s biggest beer maker clinched a deal Tuesday to take over its nearest rival in a bid to stave off the megabrewers’ most serious problems: the surge in popularity of craft brews and weakening sales in the rich markets of the U.S. and Europe.

SABMiller accepted in principle a takeover bid worth 69 billion pounds ($106 billion) from Anheuser Busch InBev in a deal that seeks strength in size. The combined company would control nearly a third of the global market.
Belgium-based AB InBev, already the world’s largest brewer, makes Budweiser, Corona, Stella Artois and Beck’s. SABMiller, based in London, has Miller Genuine Draft, Peroni and Milwaukee’s Best among its 200 or so brands.
AB InBev’s determination to close the deal after five attempts shows how established beer brands know they have to act to adapt to shifting global tastes.

In coming years, beer sales are expected to grow most in emerging economies in regions such as Africa, where SABMiller has a strong presence.

The sheer size of the deal, however, is likely to invite resistance from regulators, notably in the U.S. and China, amid concerns that the merger could stifle competition and reduce consumer choice. In the U.S., any deal is widely expected to require the sale of Miller’s stable of beers.

SABMiller employs 69,000 people in 83 countries. AB InBev has 155,000 workers in 25 countries.

The markets think the deal is now likely, and SABMiller’s shares rose to near the bid price. They closed up 8.4 percent at 39.26 pounds in London. AB InBev’s share price rose 1.7 percent to 100 euros in Brussels.

In statements, the two companies said the all-cash offer represents a premium of around 50 percent to SABMiller’s share price on Sept. 14, the last trading day before renewed speculation of an approach from AB InBev emerged.
The new company is expected to be based in Belgium, home to AB InBev’s current headquarters, where there is a beer tradition dating back to the Middle Ages.

AB InBev has agreed to pay $3 billion to SABMiller if the deal does not close because of failure to get the approval of regulators or AB InBev shareholders.
Most analysts believe the two companies are geographically diverse enough that regulators will not have to scrap the deal outright.

Regulators could force the companies to sell some brands.

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Source:Indianexpress

Beer giants SABMiller and AB InBev to join hands