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WATCH: What AB InBev’s £68bn acquisition of SABMiller means

Watch two Bloomberg videos at the end of the story, where analysts discuss the impact of the merger.

Cape Town – SABMiller [JSE:SAB] shareholders will see benefits from the merger with Anheuser-Busch (AB) InBev, an analyst said on Tuesday.

SABMiller shot up by almost 11% on Tuesday to R811 on the JSE after it was announced that AB InBev agreed to buy the brewer for £68bn (about R1.4trn).

READ: JSE cheers historic SABMiller deal

The deal means that one in every three beers in the world will fall under a single company.

"AB InBev has paid a reasonably full price for SABMiller, which certainly passes some of the merger benefits to SABMiller shareholders,” said takeover expert Professor John Colley from Warwick Business School in the UK.

“It is a decent deal for both shareholders as AB InBev probably will extract the synergies and consolidate a declining market,” he said.

He said while AB InBev has a good record with previous acquisitions, shareholders should expect substantial redundancies and cost savings over the next year.

Stumbling blocks examined

Bloomberg's Thomas Buckley said on Tuesday that competition issues have been investigated and should not be an issue.

“Because the deal has been anticipated for so long in the industry, all the analysists have really modelled all the anti-trust considerations from the very early stage,” he said.

“That includes the US, where SABMiller will probably have to sell its stake in MillerCoors,” he said. "In China, it owns a joint venture with China Resources Enterprise. All those considerations have been laid out.”

Buckley said SABMiller is becoming part of a company that has always “intrinsically been focused on profits, on value generation over a period of time”.

“AB InBev is a company that has serially acquired and delivered extremely quickly, so I think shareholders are in good hands,” he said.

Regarding the culture clash between the two companies, Buckley said: “AB InBev has always been rigorously focused on cost cuts and profitability.

“I think that SABMiller – certainly in recent times – also focused extensively on tradition and also on the fun of drinking beer,” he said.  

Beer market is flat

Colley said the global beer market is largely flat and in some regions is declining as other beverages such as wine continue to penetrate.

“Micro brewers and their highly differentiated cask ales also continue to make progress,” he said. “As a consequence cost, product and distribution rationalisation become an attractive way of increasing shareholder returns.

"In major manufacturing operations economies of scale can be enormous, which means breweries will be rationalised to focus on the largest and most modern,” he said. “Scope economies will be substantial too as Head Offices and country management teams are likely to be rationalised.

“Combined purchasing power should also realise substantial savings. AB InBev has both a reputation and demonstrable track record for being able to effectively extract these savings."

SABMiller employees feel apprehensive

Employees of SABMiller may feel apprehensive about the decision by the company's board to accept the takeover bid, said Johan Botes, director of employment practice at Cliffe Dekker Hofmeyr.
 
"Under South African employment law, employees enjoy significant protection against unfair termination of employment or amendments to terms and conditions of employment following the transfer of a business," he said.

"Should Anheuser Busch and SABMiller merge to form a new entity, the employees of SABMiller may not be dismissed by the new entity purely as a result of the merger," he explained.

It is likely that AB InBev will implement its own business practices and policies at SABMiller. "Whether this is to the benefit or detriment of employees, remains to be seen," he said.

WATCH: A clash of cultures

WATCH: What could still go wrong

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