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Department of Justice Moves Mega Beer Merger One Round Closer

Posted  July 22, 2016

By Matthew Vaccaro

U.S. Department of Justice (“DOJ”) antitrust officials have approved Anheuser-Busch InBev’s (“ABI”) $107 billion takeover of SABMiller, on condition that ABI divest substantial assets, agree to prohibitions of certain distribution practices, and submit to ongoing agency oversight of ABI’s future acquisitions of distributors and craft brewers.

If approved by the U.S. District Court for the District of Columbia, the settlement agreed to by DOJ and ABI will permit consummation of a mega merger of the world’s two largest brewers by revenue, which together account for 70% of beer sales in the U.S.  ABI owns more than 40 major beer brands sold in the U.S., including Budweiser, Busch, and Michelob.  SABMiller is currently the majority shareholder of MillerCoors, which owns all of Miller’s American brands and operations.  In order to gain the U.S. antirust regulators’ approval of the merger, ABI has agreed to sell SABMiller’s entire interest in MillerCoors, including its worldwide Miller brand rights.

The settlement also comes with significant requirements to protect distribution for craft beers.  ABI will discontinue its various distributor-incentive programs including the Voluntary Anheuser-Busch Incentive for Performance Program (VAIP), a tiered program of reimbursements to incentivize distributors based on the percentage of ABI beer sold compared to the sale of rival beers.  A cap will also be placed on ABI’s self-distribution volume and any distributor or craft-brand acquisition will face DOJ scrutiny for the next 10 years.

The merger will position ABI to offset lost U.S. sales, from the increasing popularity of craft brewing in the U.S., by gaining access to emerging markets in Latin America and Africa.  SABMiller’s brewing operations in Africa alone span 31 countries and Latin America’s beer market is forecasted to reach over $75 billion by 2021.

Upon final approval of the deal, ABI and SABMiller would combine for 30% of the world’s beer.  The deal has already been cleared by Australian, European, and South African regulators.  Regulatory clearance in China is still required, but SABMiller has agreed to sell its ownership stake in CR Snow, China’s largest brewer, in order to ensure regulatory approval.

Edited by Gary J. Malone

Tagged in: Antitrust Enforcement,