US Senators call for hearing on AB InBev planned purchase of SABMiller

Posted on 21 Oct 2015 by Aiden Burgess

Top US Senators have announced a hearing on Anheuser-Busch In Bev’s plans to purchase SABMiller.

The US Senate Judiciary Committee’s antitrust subcommittee will hold a hearing to discuss Anheuser-Busch InBev SA’s plans to buy fellow beer giant SABMiller PLC for over $100bn.

Chairman of the Senate’s antitrust panel and Republican Senator Mike Lee announced the hearing into the takeover this week, along with Democrat Senator Amy Klobuchar of Minnesota.

The date of the hearing or other details were not given during the senators’ announcement.

The proposed hearing is in reaction to the recent takeover proposal which could see the world’s two largest brewers combine.

British brewer SABMiller announced last week that it had agreed to a takeover by AB InBev, the world’s largest beer producer.

The cost of buying SABMiller for the Belgian-Brazilian group is around $109bn (£70bn), making it the third largest ever takeover offer ever recorded.

After weeks of back-and-forth between the two companies, which included five revised proposals by AB InBev, SABMiller’s board agreed to unanimously recommend to its shareholders to accept AB InBev’s proposal to pay £44 ($67) a share to buy the London-based brewer.

Regulators may block takeover

But before the massive merger becomes a reality, it still has to pass the necessary regulatory clearances and scrutiny, such as the proposed US Senate hearing.

If AB InBev can’t get these clearances for the deal to close, it will have to pay SABMiller a break-up fee of $3b.

If the merger is approved by global regulatory bodies, it is expected to have repercussions and a massive effect for the rest of the global beer industry.

One country in particular that would feel the effects of a potential merger is the US, where the two companies would own about 70% of the beer market unless some assets are sold off.

The long-rumoured merger of the two biggest beer companies in the world would bring AB InBev’s household brands such as Budweiser, Corona and Stella Artois together with SABMiller’s marquee brands such as Grolsch, Peroni and Pilsner Urquell.

The potential combination of brands as a by-product of the deal is what has been described by some analysts as the last major piece of consolidation that remains in the beer industry.

In the same fashion the proposed takeover has raised the concerns of top US Senators, Australian regulators have also expressed their concerns about the potential merger.

The takeover would combine Australia’s biggest and third-biggest brewers to control 46% of Australasia’s 2 billion litre beer market, according to figures from Euromonitor.

It’s a business scenario that former chairman of the Australian Competition and Consumer Commission (ACCC) Allan Fels said maybe blocked by Australian regulators.

“This deal will not have an easy ride through the ACCC,” the Sydney Morning Herald quoted Fels as saying.

“The battle between second and third position often stimulates competition more generally in the market,

“In this case it’s not clear there is a lot of surrounding competition, and therefore it could be that a cosy duopoly emerges,

“It’s conceivable that the merger is blocked internationally, but if it’s not, if it sails through overseas but is blocked here, they’d have to consider calling off this part of the transaction.”

AB InBev isn’t the only major beer company to be preoccupied with takeover efforts in recent times.

Heineken announced last week that it had acquired a majority stake in Slovenian brewer Pivovarna Lasko for $135m (£87m).

The Dutch beer giant acquired the majority stake in its fellow European brewer just days after AB InBev reached its deal to buy SABMiller.

The world’s third largest brewer’s deal with Pivovarna Lasko follows its recent 50% acquisition of Californian craft brewery Lagunitas, which was announced in September.

Heineken also recently bought Diageo’s brewing interests in Jamaica, Malaysia and Singapore in a deal worth $780m ($505m).