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5 Things You Need to Know About AB InBev's Acquisition of SABMiller By Sean O’Reilly
1. $100 Billion Mergers Don’t Happen Everyday Proposed acquisition of SABMiller by AB InBev comes with a hefty $107 billion price tag. Would rank as 4th biggest acquisition of all time, just ahead of Pfizer’s $90 billion purchase of Warner-Lambert, if completed. Combined entity would be the world’s largest brewer by multiples.
2. A Giant is Born Both companies are no strangers to huge mergers: AB InBev is the product of a succession of mergers, starting with Dutch brewer Interbrew’s 2004 acquisition of Brazilian AmBev SABMiller was created when South African Breweries purchased Miller Brewing in 2002. Even as separate entities, both are enormous enterprises
2. A Giant is Born AB InBev is the world’s largest brewer already, with over 200 brands and a presence in over 30 countries Global market market share of approximately 21% SABMiller is the world’s second largest brewer Dominant in Africa and South America Strong presence in U.S. through 58% ownership of MillerCoors 10% Global market share
3. Antitrust Concerns Acquisition likely to attract considerable attention from antitrust regulators all over the world Particularly true in the U.S. Though its 58% ownership of joint venture Miller Coors, SABMiller controls 26% of U.S. Beer Market AB InBev, thanks to its 2008 acquisition of Anheuser-Busch, currently controls 44% of U.S. beer market
3. Antitrust Concerns U.S. Justice Department judges competitiveness with the Herfindahl-Hirschman Index (HHI) Index calculated by squaring market shares of each competitor and summing the products U.S. beer industry currently has HHI of approximately 2,696 Justice Department prefers markets to be below 2,500 Combined SABMiller/AB InBev would have 68% market share in the U.S. Would send U.S. beer market HHI to unheard of 5,366
3. Antitrust Concerns Anticipating U.S. Justice Department objections of acquisition, company plans to sell 58% stake in Miller Coors to Molson Coors Brewing for approximately $10 billion Selling SABMiller’s entire U.S. operation points investors to real reason for this merger
4. Why Merge? Merger has considerable benefits, shifting focus of both companies further towards emerging markets AB InBev distributes beer in over 100 countires and has bottling operations in 25 Notable Markets: The United States, China, Brazil, Europe, and Mexico SABMiller sells beer in over 80 countries Dominant in Africa with strong South American and Asian presence
5. Likely Outcomes Preliminary sale of 58% stake in Miller Coors to Molson Coors recently announced Eliminates major antitrust objections from U.S. Justice Department Formal acquisition announced on November 11, 2015 Deal likely to pass with regulators due to lack of overlap in specific markets
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