SABMiller has agreed to merger with Anheuser-Busch InBev (NYSE:BUD) for an astonishing amount of 68 billion pounds ($104 billion). This offer represents 44 pounds ($67.59) per share. The merger, when and if completed successfully will create one of the most powerful companies in the world with annual sales valued at approximately $55 billion. Anheuser-Busch InBev has managed to convey SABMiller towards the merger only after the fifth attempt. Shares of Anheuser-Busch InBev are up more than 2% Tuesday.
Beer is the most popular alcoholic beverage in the world, and at the moment, the industry can be viewed as a duopoly, especially in the United States. This duopoly formed very recently, when in 2008 Anheuser-Busch and InBev merged and the world’s largest brewing company was created - Anheuser-Busch InBev. Out of fear that Anheuser-Busch InBev will be impossible to compete against, two other companies joined forces, SABMiller and Molson Coors, who have combined their operations in the United States and Puerto Rico forming a joint venture – MillerCoors. The two companies’ combined are now having almost a complete duopoly in the United States, with about 80% of all beer brands under their umbrellas. As for the global market, the two companies control about 40% of the beer industry.
The merger between the brewers has its opposition, mostly due to fears of monopoly in the brewing industry. Daniel Matjila, head of The Public Investment Corp., a South African state-owned pension fund manager who is SABMiller’s fourth-largest shareholder, explained, “Quite frankly I’m not in favor of it… We may be creating some kind of a monopoly going forward which may have a serious impact on the global economy and beer market in general.”
If the deal is completed, the merger between the two brewers will be ranked in the top five mergers in business history. In case the merger fails to integrate successfully SABMiller will receive a penalty payment from AB InBev of $3 billion dollars.