Daily Management Review

US Regulators Approve AB InBev, SABMiller Deal, Craft Beer Protections Added


US Regulators Approve AB InBev, SABMiller Deal, Craft Beer Protections Added
After agreeing to unload beer assets and preserve competition from independent craft brewers, Anheuser-Busch InBev and SABMiller received approval for their $107 billion merger from U.S. antitrust regulators.
The Department of Justice had derailed several recent mega-mergers over antitrust concerns and the regulator’s approval is therefore notable and comes with a number of stipulations.
As part of the deal, concessions beyond its publicly stated offer to sell SAB's stake in MillerCoors will be made by the Belgian brewer. MillerCoors is SAB’s U.S. joint venture with Denver-based Molson Coors. In order to limit competition, AB InBev will also have to curb its use of incentive programs.
It had been reported earlier that DOJ was investigating AB InBev's practice of iving financial doles to encourage distributors for selling more of its own beer than its competitors. Competitors had argued that their ability to sell was being hurt by the practice.

"Independent distributors that sell (AB InBev’s) beer will have the freedom to sell and promote the variety of beers that many Americans drink," Deputy Assistant Attorney General Sonia Pfaffenroth of the Justice Department's Antitrust Division said.
Budweiser, Stella Artois, Miller and Pilsner Urquell are the brands that are held by the world's top two brewers.
"While we will make some adjustments to certain aspects of our U.S. sales programs and policies, our fundamental approach and commitment to this market will not change," said AB InBev Chief Executive Officer Carlos Brito in a statement.
Before acquiring any beer distributors or craft beer brands, AB InBev will also be required to secure the DOJ's approval.
Looking to benefit from a rapidly growing niche market in the slowing beer industry, AB InBev has already acquired several regional craft beer companies. Oregon-based 10 Barrel Brewing, Virginia-based Devil’s Backbone Brewing Company and Colorado-based Breckenridge Brewing are among its recent deals.
"The DOJ’s significant requirements... appear to address some of our major apprehensions with the merger. With effective enforcement of these provisions, small brewers can rely on their independent distributor partners to access the market," Bob Pease, president and chief executive officer of the Brewers Association, said in a statement.
Terms of AB InBev's agreement with the DOJ expire in 10 years. Rights to all SABMiller beer brands currently imported or licensed for sale in the United States would also be divested by AB InBev.
According to Adam Fleck, equity analyst with Morningstar in Chicago, the deal changes little within the U.S market. However "there's a chance to increase the profitability for Molson Coors and MillerCoors enterprises that will make MillerCoors more competitive," he added.

Dwarfing other major producers like Heineken and Carlsberg, the deal positions the combined companies to produce almost a third of the world's beer. As major markets such as the United States weaken due to craft beer popularity, InBev will have more breweries in Latin America and Asia and an entrance to Africa.
The deal has been cleared by Australia, Europe and South Africa. A proposed sale of SABMiller's stake in CR Snow was expected to lead to clearance, the companies are waiting for China to approve it.

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