Belgium’s Anheuser-Busch InBev NV on Friday warned that its beer megamerger with SABMiller PLC could lead to thousands of job losses in coming years, according to documents related to the transaction.
The company said around 3% of the total workforce of the combined group could be laid off, but said “job reductions will be implemented gradually, in phases, over a three-year period following” the completion of the merger.
A person familiar with the details said the estimated job losses are around 5,500.
AB InBev says it currently employs around 150,000 people, while SABMiller puts its workforce at around 70,000. However, SABMiller is due to dispose of most of its European assets under the deal.
AB InBev said the 3% figure excludes sales and front-office supply staff. The company said it wasn’t able to advance its integration plans for the workforce in those position because of regulatory restrictions.
The cuts will contribute to AB InBev’s expected $1.4 billion in annual cost savings by the end of the fourth year after the transaction. Additional savings will come from raw material procurement and other improvements.
The documents show AB InBev and SABMiller will spend nearly $2 billion on closing costs and fees related to the transaction, amounting to a big payday for bankers, lawyers and consultants.
AB InBev will spend $1.735 billion, including $725 million in financing arrangements; $475 million in transaction taxes and other costs; $135 million for financial advice to Lazard Ltd. and others; $185 million on legal advice; $180 million on management consultants and other services; $20 million on public-relations advice; and $15 million on accounting advice.
SABMiller will spend $202 million in closing fees, including $113 million on financial advice to Robey Warshaw LLP and others; $76 million on legal advice; $9 million on public-relations advice; and $4 million on accounting advice and other costs.
AB InBev and SABMiller expect to close the $100 billion-plus merger on Oct. 10. The transaction would create a global beer giant with more than 400 brands and a roughly 26.8% share of the global beer market, according to industry tracker Plato Logic.
Acquiring SABMiller would give AB InBev access to the fast-growing African beer market and reduce its reliance on the U.S. AB InBev said Africa is expected to represent 8.1% of global beer industry volumes by 2026, up from 6.5% in 2014. Beer volumes on the continent are expected to grow three times faster than global industry volumes, according to the documents.
In addition to relying on Africa to help boost growth, the deal gives AB InBev new territory to expand sales of its global beer brands Budweiser, Corona and Stella Artois.
AB InBev has set an internal target of increasing revenue to $100 billion by as soon as 2020. The Belgian brewer’s revenue for the 2015 fiscal year was $43.6 billion, while SABMiller’s was $22.1 billion, bringing their combined total to $65.7 billion, excluding divestitures.
The offer documents said that combined company’s business model will focus on “organic revenue growth ahead of the industry, coupled with tight management costs.” Key to that will be AB InBev strategies such as “zero-based budgeting,” a system that requires managers to plan each year’s budget as if no money existed the previous year. It forces them to justify costs and has helped foster AB InBev’s reputation as a cost-cutter.
By Tripp Mickle and Laurence Norman
Source: Wall Street Journal
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