The Strategist

Anheuser-Busсh InBev, SABMiller created the largest brewing company


10/11/2016 - 16:09



The world's largest beer maker Anheuser-Busch InBev (AB InBev) announced closure of a historic deal to acquire its UK rival, brewer SABMiller, for $ 106 billion. Now, AB InBev is the largest brewing company in the world with an annual turnover of $ 55 billion, a quarter more before the deal, says Financial Times (FT). Stock trading of papers of the combined company will begin on 11 October.



Petr Kratochvil
Petr Kratochvil
For many years, AB InBev (brands Bud, Stella Artois, Becks) and SABMiller (Miller, Pilsner Urquel, Grolsch) had fought for the palm in the world beer market. In 2008, AB InBev has become the undisputed leader when Belgian InBev acquired American Anheuser-Busch for $ 52 billion, and SABMiller has not agreed to buy Dutch Heineken. 

After the deal with SABMiller, AB InBev has become one of the world's largest beverage manufacturers, with revenue bigger than that of Coca-Cola. Alicia Forry, analyst at Liberum commented: "AB InBev needed the deal. Forecasts for growth of the company's profits were questionable, level of sales in the US is low, the Brazilian market has grown slowly, and synergies from previous mergers have dried up".

The deal on absorption of SABMiller is the largest in the history of British companies, and the world's third M&A deal. For AB InBev, it is one of many deals on acquisitions over the last 27 years. Such purchases made AB InBev a giant, which occupies 45% of the market in money terms, and its profit rose to the highest in the industry, notes the FT. EBIDTA of the company in 2015 grew by 38.6% against 26% in 2004. In real terms, the combined company has received about 30% of the global beer market according to Bloomberg.

Now, main goal of AB InBev is paring more than $ 100 billion in debt, which is 4.5 times higher than EBIDTA of the company for 2015, the Liberum analyst noted. However, despite the large debts, Moody's is still keeping a high credit rating of AB InBev.

Until now, AB InBev has mainly absorbed companies operating in the local markets. Acquisition of SABMiller, which is present in 70 countries, was the hardest purchase for AB InBev. Liberum analysts believe that this could create administrative difficulties for AB InBev. Robert Ottenstein from Evercore ISI believes that management of SABMiller can be a real challenge for AB InBev, which has no similar experience in managing companies.

According to the policy on costs reduction, AB InBev will reduce about 5,500 jobs, or 3% of the total number of employees of the merged company. AB InBev also plans to optimize costs by closing regional offices, reducing purchase cost of raw materials and packaging, as well as optimizing production capacity, says FT.

source: ft.com, bloomberg.com