Anheuser-Busch InBev NV said Thursday it reached an agreement with the South African government to create a $69 million investment fund and other commitments designed to help it secure regulatory approval of its acquisition of rival SABMiller PLC.
The roughly $108 billion deal between the world’s two largest brewers is being evaluated by South Africa’s Competition Commission. The agency recently asked for an extension of its review because it had concerns about the merger. Among the things it is evaluating is the deal’s impact on so-called public interest, which includes unemployment.
AB InBev’s commitment appears to address potential unemployment concerns. The company said it has agreed that no employees in South Africa would lose their jobs as a result of the merger. It also committed to maintain the same number of employees SABMiller has in South Africa for the five years after the deal closes.
Additionally, AB InBev said it would invest $69 million to support farmers, local manufacturing, jobs and the reduction of harmful alcohol use. Some of that money will fund 800 new “emerging farmers” and 20 new commercial farmers, who will produce barley, hops, maize and malt for the company.
AB InBev also committed to expanding barley production so that South Africa can become an exporter of malted barley used in beer. Currently, it imports barley.
South African regulators still need to approve the deal, but South African Minister of Economic Development Ebrahim Patel said in a statement that the commitments meet the requirements of the country’s competition laws. He said AB InBev’s commitments “ensure that the (SABMiller) transaction has a net benefit for the country. The commitments made by the company are the most extensive merger-specific undertakings made to date in a large merger.”
AB InBev said the commitment agreement will be provided to South Africa’s Competition Commission for consideration in its review of the merger’s effects on competition and public interest. Following its review, the commission is expected to take a position on the merger. The Competition Tribunal, a separate body, will consider that position and determine whether the merger can proceed.
By striking a commitment agreement, AB InBev is trying to avoid a protracted regulatory review in South Africa. The country’s emphasis on protecting jobs after a merger has contributed to lengthy reviews of other global deals such as the soft-drink bottling tie-up among Gutsche Family Investments, Coca-Cola Co. and SABMiller. The deal was agreed to in November 2014 but hasn’t been completed.
CLSA analyst Caroline Levy said the agreement is a positive step and puts the AB InBev-SABMiller deal on schedule to close in the second half of the year. The company also needs regulatory approval in the U.S., Europe and China.
“They still have a lot to do, but…this is a big one because South Africa is a lot of the reason they want this deal,” Ms. Levy said.
SABMiller has a strong presence in Africa, one of the few global beer markets expected to grow in the coming years with a compound annual growth in volume of 3.7% through 2020, according to industry tracker Plato Logic.
“We are excited about the growth opportunities and the role South Africa will play in our combined business,” AB InBev Chief Executive Carlos Brito said in a statement. He added that the company’s “commitments seek to build on” SABMiller’s history in South Africa.
By Tripp Mickle
Source: Wall Street Journal
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