AB InBev’s acquisition of SABMiller is looking increasingly expensive, says a well-known academic, as the various competition authorities exact a heavy price to approve the deal.
Professor John Colley, of Warwick Business School, thinks that instead of one in three beers worldwide being brewed by AB InBev post the deal, it is looking like one in four or even five.
Prof Colley said: “The US Department of Justice has just approved the acquisition of SABMiller on the condition that all the US acquired business is disposed and smaller brewers are allowed unfettered access to distribution. The European Competition authorities have been particularly demanding, similarly requiring all the European acquired businesses to be sold off.
“Grolsch and Peroni have gone to Asahi, a Japanese Brewer for $2bn. Something of a surprise to AB InBev is that all the Eastern European assets, including Pilsner Urquell, have to be sold and are up for sale at a price tag of around $5bn. The EC has required all the Eastern European assets to be sold to one buyer.
“In the US,all the acquired SABMiller businesses have had to be sold at a price of $12bn to Molson Coors in Canada, which included the Miller brand. While in China, the joint venture which owned Snow, with around 20% market share, is being sold to the joint venture partner China Resources Enterprise for $1.6bn.”
He added: “In effect, all the purchased assets of SABMiller in North America, Europe and China have had to be sold at a combined price of around $20bn. As AB InBev’s total outlay was $106bn for SABMiller, this means they have paid $86bn for the positions in the growth markets of Africa and Central and South America. The extent of divestments to gain competition clearance has come as a shock to AB InBev. This is starting to look like a very expensive purchase indeed and AB InBev may well struggle to justify it.”
