Regulatory questions surround possible beer blockbuster
Analysts are predicting a portion of SABMiller would likely have to be divested if a deal with Anheuser-Busch InBev comes to fruition.
The world’s two largest brewers are exploring the possibility of a combined company, which some industry observers believe would be valued around $250 billion.
The increasing popularity of craft beer, wine and spirits is a key factor behind a potential deal, says Edward Jones Consumer Analyst Brittany Weissman.
“People are not necessarily super-loyal to one type of drink. They don't have to go and get that one beer.
People are trying new and different things and as a result that's hurting volumes.”
AB InBev has a roughly 45 percent share of the U.S. beer market, while SABMiller controls as much as 27 percent.
At first glance, a combination would create a brewing behemoth that would bring popular labels like Bud Light and Miller Lite under the same corporate umbrella.
But that might not be the end result because of federal laws.
“We think that anti-trust regulators would come in and say that SABMiller would have to divest their stake in the MillerCoors joint venture,” says Weissman.
“Which would create an opportunity for MolsonCoors to come in and basically own 100 percent of that joint venture.”
It can be confusing, but essentially Miller’s interests in the U.S. break down like this:
- MillerCoors is a joint venture with MolsonCoors owning 42 percent and SABMiller controlling 58 percent.
- If a deal with Anheuser-Busch goes through, MolsonCoors would have an immediate option to increase its stake to 50 percent.
- If a divestiture is needed to comply with anti-trust regulations, MolsonCoors would likely be interested in acquiring the remaining interest in the previous joint venture.
Even with a chunk sold off, the size of an AB InBev-SABMiller combination would come with some negatives. It would not be as nimble to adjust to the changing marketplace, especially when it comes to specialty beers.
“These companies all have some of these craft and import brews,” Weissman says.
“But when you are as big as they are, it makes it harder as you build out that piece of that business to really make an impact on your overall volume.”
With that said, there are some positives.
A deal would give AB InBev access to faster-growing markets and Weissman adds there would be cost savings.
“And that’s what’s been the name of the game for this whole industry. Everybody’s been trying to cut costs.”
It’s too early to accurately gauge the impact on St. Louis.
Anheuser-Busch’s North American operations are based here, while the global company is headquartered in Europe.
Under United Kingdom regulations, AB InBev will have to decide by the middle of October whether it will put forth a formal offer.