SABMiller

U.S. approves A-B InBev acquisition of SABMiller

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• published: 21 Jul 2016
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U.S. approves A-B InBev acquisition of SABMiller Updated at 6 p.m.Anheuser-Busch InBev won antitrust approval Wednesday for its $107 billion takeover of rival SABMiller after agreeing to give up ownership of the Miller brands in the U.S. and open the door to greater competition from craft brewers.With the green light from the Justice Department, Belgium-based A-B InBev said it was on track to complete the transaction ' the biggest-ever combination in the beer industry ' in the second half of 2016. The world's largest brewer, which has already secured approvals in 21 jurisdictions around the world, still awaits antitrust approval in China."With today's agreement, we have taken a significant step forward on the transaction, which will create the world's first truly global brewer,' A-B InBev CEO Carlos Brito said in a statement.SABMiller makes Miller Genuine Draft and Pilsner Urquell, and A-B InBev's brands include Budweiser, Stella Artois and Beck's. After the merger, the combined company would control 31 percent of the beer sold worldwide, according to industry publication Beer Business Daily.As it struggles for growth in saturated markets such as the United States, A-B InBev is looking for growth in regions such as Africa, where SABMiller has a major presence. To ease concern that it would have too much control of the market, A-B InBev is selling brands in other parts of the world.To gain antitrust approval in the U.S., A-B InBev announced last fall it would sell SABMiller's 58 percent stake in Chicago-based MillerCoors. That joint venture was created in 2008 by SABMiller and Denver-based Molson Coors to sell Miller, Coors and other brands in the United States. Selling SABMiller's stake in MillerCoors means Molson Coors will own the Miller brands in the U.S.For the U.S. market "this doesn't change a whole, at least not immediately,' said Adam Fleck, equity analyst with Morningstar in Chicago. "There's a chance to increase the profitability for Molson Coors and MillerCoors enterprises that will make MillerCoors more competitive.' Longer term, Fleck said, a consolidated MillerCoors could itself become a more potent rival to independent craft brewers, particularly in negotiating distribution deals.A-B InBev previously made other commitments that are part of the brewer's consent decree released Wednesday by the Justice Department. A-B agreed to cap the number of distributors it owns so that no more than 10 percent of its annual volume is distributed by company-owned distributors, and agreed it wouldn't terminate existing distributors as a result of its acquisition of SABMiller.As part of the consent decree, A-B agreed to review and modify its U.S. sales programs and policies related to incentives. Reuters announced in May that U.S. antitrust officials were investigating A-B InBev over incentives that encouraged independent distributors to sell more of its own beer brands at the expense of competing craft beers. "The remedy we secured will help preserve and promote competition in the multi-billion dollar U.S. beer industry,' Deputy Assistant Attorney General Sonia Pfaffenroth of the Justice Department's Antitrust Division said in a statement."Independent distributors that sell (A-B InBev's) beer will have the freedom to sell and promote the variety of beers that many Americans drink,' she said.Joao Castro Neves, zone president of North America and CEO of A-B's U.S. headquarters based in St. Louis, told the Post-Dispatch that the VAIP program will end. Incentives for distributors built around other brands "will no longer exist,' he said.A-B InBev agreed to continue to allow the Justice Department to review acquisitions of craft brewers in the U.S., a stipulation put in place when the brewer acquired the 50 percent of Mexico's largest brewer Grupo Modelo it didn't already own in 2013."The U.S. market is very competitive '¦ and nothing in this transaction, in our opinion, will impact that competitiveness,' Neves said.The Associated Press and Reuters contributed to this story.