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Cape Town – Anheuser-Busch (AB) Inbev’s plan to sell off a number of key brands as part of its merger with SABMiller [JSE:SAB] to appease competition authorities could be bad news for its shareholders, an expert warned on Monday.
John Colley, a professor of practice at Warwick Business School in the UK and an expert on large-scale mergers, said certain deals are starting to look “cheap”.
READ: SABMiller: New owners want to sell top brands
"A number of AB InBev disposals are being negotiated to appease competition authorities in North America, Europe and China, but the deal with Molson Coors in the US at $12bn is now starting to look cheap.
“It now emerges that this not only included worldwide rights to the Miller brand, but also North American rights to Grolsch and Peroni,” he said. “Molson Coors has a form of pre-emption rights. This, together with urgency to sell, has combined to make this a good deal for Molson Coors shareholders.”
AB Inbev agreed to acquire SABMiller for £68bn (about R1.48trn) in October, creating a megabrew company that could dominate the global beer market.
The plan to sell Peroni and Grolsch is due to competition concerns, and there is no doubt others may follow, said Colley.
“In China, the SABMiller brand Snow is likely to be sold to joint venture partners China Resources Enterprise,” he said. “They may also have pre-emption rights.”
Snow at one time was believed to have 20% of the Chinese beer market. “Outside of South America and Africa one wonders how much of SABMiller can be retained,” said Colley.
READ: SAB China partner said to seek pitches on Snow Beer deal
The Meantime craft beer brewer in London is also to be sold, having very recently been purchased by SABMiller for more than £50m.
Colley questioned who would buy the brands.
“Molson Coors will be highly borrowed, Heineken will have European competition issues, and Carlsberg are busy cutting costs,” he said.
“Private equity (are) strong possibilities, but will generally pay less than trade buyers, and certainly not the 40% bid premium AB InBev are paying for SABMiller.
"In view of the extent of the SABMiller bid premium, these are not likely to be good deals from the AB InBev shareholder's perspective,” he said.
“Pre-emption rights to joint venture partners or sales to private equity (usually mean buyers) are all going to be lost shareholder value.
“The extent of divestments currently in negotiation, suggests that growth by acquisition of beer brands in North America, Europe or China is finished for AB InBev.
“Further acquisitions will involve diversification beyond beer, which will carry heightened risk.”
