The Budweiser/Miller Merger

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The Budweiser and Miller merger is set to change the beer industry forever. The respective companies, Anheuser-Busch InBey and SABMiller will be joined into one company. Initial reports had the acquisition listed at $104 billion-$106 billion.

An acquisition of this magnitude will be under immense scrutiny by several governments.

If the merger is allowed, the two companies will combine for revenue of $64 billion a year. The United States is one of the markets where the biggest scrutiny will occur due to the size of the companies. It’s expected that the company will dominate several different markets worldwide.

Both companies have been in talks for weeks with a deadline that was set on Wednesday, October 14th as the final, formal offer allowed under British takeover rules. If the companies had not agreed on a sale price by this time, they would have had to wait another six months before engaging in talks.

Many of the biggest shareholders from both companies have been in talks for weeks. 3G Capital, an investment firm that helped form Anheuser, was in discussion with the Santo Domingo family which holds a large share of 14% SABMiller. The family also is an investor in 3G Capital.

3G was tasked with the job of negotiating with other shareholders of SABMiller. The company is said to have negotiated with Altria, which holds a 27% share of the company. Once all of the major shareholders were on board, they agreed to a sale price of £43.5 a share.

According to spokespersons for both companies, SABMiller was very concerned with the acquisition due to regulatory approvals. Talks took more than a day, with the company seeking a higher premium for its shareholders and a guarantee from Anheuser-Busch that they would do everything in their power to obtain regulatory approvals for the merger.

On Tuesday, the next day following the talks, the board along with Altria and the Santo Domingo family were ready to recommend the offer anonymously. All members recommended the offer as long as all the terms and conditions were satisfied.

British regulators allowed the talks to continue for another two weeks, with the deadline of October 28, 2015, so that a merger agreement can be finalized.

Following news of the merger, SABMiller stock rose more than 9%. Many of the world’s most popular beers will now be under control of one company. Corona, Budweiser, Grolsch and several other beers will be controlled under the company.

This will allow Anheuser-Busch to break into emerging markets that it has failed to enter in the past. The company hopes that the acquisition will allow them to enter into the African and Latin American markets to further gain exposure for their line of beers.

According to Euromonitor International, the combined companies would hold a 29% market share. The company is expected to sell some assets to meet regulatory requirements. In terms of sales, the combined company would have three times as much sales as its next closest competitor, which will be considered during regulatory talks.

Anheuser-Busch is certain that the deal will be approved, and has also agreed to pay a $3 billion fee to SABMiller if the deal fails as a result.

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