Largest Beer Merger in Global History
The Department of Justice has decided to allow Anheuser-Busch InBev (ABI) and SABMiller, which are the biggest beer companies in the world, to merge in the United States. The decision came down today as a settlement in federal court. There are many conditions associated with the settlement, and the Department of Justice’s approval only has jurisdiction in the United States. The deal has not gotten approval everywhere yet, but it looks like this will happen. More on that below.
Details of the Merger
The settlement also still has to be approved by a federal judge. This is not expected to be a problem, as generally federal judges follow the rulings of federal departments like the Department of Justice. The merger is technically a purchase by ABI of SABMiller. As one of the conditions of the purchase, SABMiller will have to spin off the MillerCoors branch of its business. Experts had expected that the DOJ would only require SABMiller to spin off Coors, but the DOJ has stated that this would not protect the other companies in the beer industry, many of whom are small craft beer firms. The Department of Justice has also placed limits on any future price hikes by the new corporation.
More Conditions of the Deal
The settlement also includes additional stipulations to help smaller beer companies who are worried about ABI’s control of beer distribution. Anheuser-Busch InBev will have to stop running incentive programs that reward distributors for limiting sales of beer that’s not made by ABI. Additionally, the DOJ will closely inspect any future purchases by ABI of wholesalers or breweries. These conditions only apply in the United States, and regulatory bodies in other countries have imposed their own conditions.
Anheuser-Busch InBev Releases Statement
Anheuser-Busch InBev has released a statement saying that they will not buy a distributor if it would mean that more than 10% of their yearly output is distributed through distributors that they own entirely. However, they also stated that they would not terminate any existing relationships with wholesalers as a result of the merger. This statement is carefully worded to allow Anheuser-Busch InBev a great deal of leeway in their business operations, and seems to be calculated to manage public opinion about the deal. Consumer groups have expressed their concern.
The Merger Isn’t a Done Deal… Yet
The DOJ settlement was one of the last legal challenges facing the proposed merger. The merger has now been approved by 21 jurisdictions, including the European Union and South Africa. ABI is still working on getting permission from China for the deal. Of course, the deal must get the permission of shareholders of both companies.
Small Brewers Still Worried
Despite all of the conditions placed on the merger by the DOJ, small brewers are still concerned about the deal. The merged company will have nearly 30% of the world’s beer supply, and a combined revenue of over $60 billion. This makes it several times the size of the next biggest beer company. There is no doubt that big beer already exerts considerable influence over the industry. This merger looks like it will strengthen this dynamic considerably. The news is grim, and there will certainly be backlash, particularly from the craft beer community.