AB-InBev offers SAB’s managers severance packages
Following its takeover of SABMiller, AB-InBev has embarked on its ambitious cost-cutting programme. One of its more public measures is offering managers at South African Breweries (SAB) voluntary severance packages.
Under the agreement with South Africa’s competition authorities, AB-InBev cannot make any forced retrenchments and there may be no voluntary separation arrangements for employees at the bargaining unit level until 2021, it was reported.
However, South African media were leaked an internal memo in January 2017 which says that the brewer had offered more than 1,000 managers in South Africa voluntary severance.
Of course, it is still uncertain how many people may opt for the voluntary offer. But who will have the strength and the wisdom to turn it down if they know that their jobs are already considered superfluous?
In 2015, AB-InBev agreed to buy SABMiller for over USD 100 billion and the deal was officially passed in September 2016 after months of antitrust clearance around the world, which saw SABMiller offload many of its international units like China, North America, and Europe.
AB-InBev has already said that it plans to cut about 3 percent of its enlarged workforce in the three years after the takeover of SABMiller. The reductions – about 5,500 jobs - will be implemented gradually and in phases, it announced. They shall help AB-InBev reach its ambitious cost-cutting target of USD 1.4 billion.
The voluntary redundancies come at a time when analysts at Deutsche Bank are voicing their doubts that AB-InBev can turn SABMiller’s African markets into a quick winner.
Through disposals, AB-InBev has already recouped a quarter of the price it paid for SABMiller. But the remaining SABMiller stub – Africa, Latin America, Australia - has higher margins than AB-InBev, the bankers said. This puts into question some of AB-InBev’s synergy targets.
Moreover, AB-InBev has paid dearly for SABMiller. Reports said the transaction value for the whole of SABMiller amounted to a multiple of 17 times profits/EBITDA. Yet, for what now remains of SABMiller, AB-InBev in fact paid a multiple of 28 times EBITDA, according to Deutsche Bank.
How AB-InBev plans to squeeze out more profits from Africa by applying its usual operational model isn’t clear to Deutsche Bank. “Despite contrary multiple pronouncements by the company, Africa is not Brazil, nor Mexico. It’s a continent, not a country; unlike the Anheuser-Busch and Modelo deals, we question the applicability of the single market organizational model,” the bank revealed.
