The battle for SABMiller is over and the battle with regulators begins

As was widely expected, AB-InBev has reached an agreement with MolsonCoors to sell SABMiller’s 58 percent stake in the MillerCoors business to its joint venture partner for USD 12 billion. This is to ward off U.S. anti-trust opposition to its GBP 71 billion (USD 107 billion) takeover of rival SABMiller. AB-InBev already controls 46 percent of the U.S. beer market.

After two months of negotiations, on 11 November 2015 AB-InBev unveiled details of a recommended offer to create a brewer controlling almost a third of the global beer market and almost half of the industry’s profits.

If the proposed deal closes it will create a company with revenues of USD 64 billion and EBITDA of USD 24 billion, surpassing Coca-Cola in sales and roughly matching the revenues of Unilever and PepsiCo. Only Nestle and Procter & Gamble would have significantly greater sales than the merged company in the consumer products industry.

The takeover will result in SABMiller departing the London Stock Exchange, where it has been listed since 1999. The new business, as yet unnamed, will have a primary listing in Brussels and secondary listings in Johannesburg, Mexico and New York, it was reported. The deal is expected to close in the second half of 2016, pending clearance from regulators and shareholders.

Despite the MillerCoors disposal, the SABMiller takeover will still face regulatory scrutiny. Many analysts believe AB-InBev will be forced to sell SABMiller’s stake in its Chinese business, which produces the world’s best-selling beer, Snow lager, to its partner China Resources Enterprise.

AB-InBev’s CEO Carlos Brito may also have to resolve a potential clash in soft drinks, as AB-InBev is a bottler for PepsiCo in Latin America and SABMiller is partnered with rival Coca-Cola in Africa.

Moreover, there is talk that SABMiller’s 24 percent stake in Turkish brewer Anadolu Efes could be sold and its partnership with France’s Castel in Africa might come to an end.

AB-InBev’s offer for SABMiller, financed with a record USD 75 billion in loans, comes in two parts. The first is a GBP 44-a-share cash offer intended for most SABMiller’s investors. The second is an offer of unlisted AB-InBev stock and cash worth GBP 41.85 and designed for SABMiller’s two biggest shareholders, the tobacco company Altria and Colombia’s Santo Domingo family, so they can avoid a huge tax bill.

Immediately following the deal, AB-InBev’s net debt will be about four times profits (EBITDA) but that is expected to quickly fall to about two times.

The Budweiser owner AB-InBev employs 155,000 people around the world, compared with 70,000 at SABMiller. AB-InBev expects to generate USD 1.4 billion of cost-savings four years after the deal, some of which will come from reducing staff numbers.

It is not known whether Alan Clark, the CEO of SABMiller, will stay with the combined company. Bernstein analysts have estimated that he will receive at least USD 65 million from the deal and that some 1,700 of SABMiller’s senior managers are in line for a windfall totaling USD 2.1 billion from shares and options.

An army of bankers, lawyers, accountants and publicists involved in the deal are expected to rack up fees of more than USD 250 million, according to the New York-based Freeman Consulting Services.