Sector News

Beer Blockbuster? Anheuser-Busch InBev sets sights on SABMiller

September 17, 2015
Food & Drink

There’s a deal in the works that could bring two of beer’s biggest rivals, Bud Light and Coors Light, under the same roof.

Anheuser-Busch InBev said on Wednesday that it has approached SABMiller about a potential takeover, in a deal that would create a global brewing powerhouse.

The news sent shares of SABMiller soaring 21% higher during midday trading in London while shares of AB InBev jumped 6% in Brussels.

In a statement, SABMiller said that AB InBev has informed them that it “intends to make a proposal to acquire SABMiller.” Its board “will review and respond as appropriate to any proposal which might be made.” It reiterated that it wasn’t a sure thing that a deal would be made, nor did it have any information about the terms of the deal. It advised shareholders to hold onto their shares and “take no action.”

AB InBev said in a separate statement that it must announce a decision to make an offer for SABMiller by 5 pm on October 14 or otherwise withdraw, in accordance with UK rules. It cautioned that no deal was certain.

Both companies are already global brewing behemoths and the deal will likely face significant antitrust concerns. Beligium’s AB InBev, which was created in a 2008 merger of Anheuser-Busch and InBev, is the world’s largest brewer with brands like Corona, Stella Artois, Budweiser and Bud Light.

London-based SABMiller is the world’s second-largest brewer and has brands in its stable like Coors Light, Miller Light, Blue Moon, Peroni Nastro Azzurro and Grolsch. It was created in 2002 when South African Breweries acquired Miller Brewing Company, the second-largest brewer in the U.S.

A merger between the two brewing giants has been a point of speculation for years. AB InBev’s largest shareholder is Brazilian private equity firm 3G Capital, which is known for acquiring businesses, stripping down costs and pursuing global expansion. Earlier this year, 3G Capital was behind the massive merger between Kraft and Warren Buffet-backed Heinz.

Average annual operating margins over the last five years are 30% for AB InBev and 22.2% for SABMiller. If they can bring the latter up to the former after a merger, that’s a lot of money to be made when you’re talking about a sales base of $10 billion plus.

Before Wednesday’s news, shares of AB InBev were up about 1% for the year while shares of SABMiller were down some 9%.

By Lauren Gensler

Source: Forbes

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