World’s largest brewer AB InBev closer to SABMiller merger

Posted by News Express | 16 April 2016 | 3,322 times

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The creation of a group supplying 30% of the global beer demand took a substantial step closer to finalisation on Thursday when an agreement was reached between the South African government and Anheuser-Busch InBev (AB InBev) on the approach to public interest issues involved in the $108bn merger between the Belgium-based brewer and SABMiller.

Key aspects of the deal include a R1bn development fund and a commitment that at no point in the future will there be involuntary job losses in SA as a result of the transaction.

In addition, AB InBev has committed to maintain its total permanent employment levels in SA for five years.

Economic Development Minister Ebrahim Patel, who is giving his budget speech in Parliament next week, said the agreement was designed to ensure South Africans know the takeover of a local iconic company will bring tangible benefits. “We engaged with AB InBev to identify commitments that can ensure the transaction has a net benefit for the country.”

Carlos Brito, CEO of AB InBev, who launched his group’s secondary listing on the JSE in January, welcomed the agreement. “Our commitments seek to build on (South African Breweries’) deep heritage and we believe there is a huge amount the two companies can achieve together to the benefit of all stakeholders.”

The agreement will speed up the competition authorities consideration of the transaction significantly, with an approval recommendation from the commission (to the Competition Tribunal) expected to be announced even before the recently extended deadline date of May 5.

The only party likely to intervene before the tribunal is the Food and Allied Workers Union (Fawu), although the generous commitment to job protection may attend to most of the union’s concerns. Fawu general secretary Katishi Masemola may, however, want undertakings to protect the quality of his members’ jobs in addition to the quantity undertakings that have been given to the government.

Assuming there are no determined interveners, the most likely of whom would have been the Department of Economic Development ahead of Thursday’s agreement, the tribunal’s hearing is likely to be a brief affair.

A possible intervention by Mr Patel was the hurdle most analysts believed could prevent AB InBev from reaching its self-imposed deadline of July for finalisation of the merger.

Reaching the July deadline means that AB InBev will receive the dividend (expected to be about $1.5bn) due to be paid by SABMiller to its shareholders in August.

While the R1bn development fund – in the context of saving a $1.5bn dividend – looks like an attractive deal for AB InBev, the restrictions imposed on its ability to cut labour-related costs might have been a tougher consideration for a group that has a reputation for taking an axe to newly acquired charges.

The development fund should also be seen in the context of AB InBev’s undertaking to sell many of SABMiller’s high-profile brands (including MillerCoors in the US, Grolsch and Peroni in Europe and Snow in China) in a bid to avoid regulatory challenges in those jurisdictions.

The sale of Snow to a government-controlled investment group was done at about $1.5bn below analysts’ valuations.

The R1bn development fund set up in terms of the agreement will be used to support smallholder farmers as well as to promote enterprise development.

The fund will also support campaigns aimed at the reduction of the harmful use of alcohol (including making available domestically produced low-alcohol and alcohol-free beer choices for consumers).

The agreement also includes commitments by AB InBev to support the participation of small craft-beer producers in domestic markets.

•Sourced from BusinessDAY South Africa. Photo shows AB InBev CEO Carlos Brito.

Source: News Express

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