USA: Justice Department poised to approve AB InBev’s takeover of SABMiller - sources

The U.S. Justice Department is poised to approve Anheuser-Busch InBev NV’s takeover of SABMiller Plc in an agreement that may include measures to keep the beer behemoth from edging craft brewers from shelves, Bloomberg reported on June 1, citing people familiar with the matter.

U.S. clearance of the $107 billion combination is on track for later this month, according to three people familiar with the process. The accord could include limits on the combined company’s ownership of distributors, said one of the people.

U.S. antitrust approval would bring the maker of Budweiser a step closer to completing the industry’s biggest merger ever and redraw control of the global beer market. The merged company will be followed by Heineken NV and Molson Coors Brewing Co. in the No. 2 and No. 3 spots by market capitalization. Following divestitures to win regulatory approvals, the deal will keep Budweiser, Beck’s and Stella Artois under AB InBev’s roof, while selling brands including Miller in the U.S. and Peroni and Pilsner Urquell in Europe.

The transaction, which was agreed to in November 2015 in a bid to boost sales by gaining access to emerging markets, has already won antitrust approval in more than a dozen jurisdictions, including the European Union.

On May 31, South Africa’s Competition Commission recommended the deal with conditions, including a sale of SABMiller’s stake in local drinks producer Distell Group Ltd. AB InBev is still seeking approval in China, where it has agreed to sell SABMiller’s stake in Snow Breweries to joint-venture partner China Resources Beer (Holdings) Co.

In the U.S., smaller brewers raised concerns about the merger from the start, complaining about AB InBev’s ownership of wholesalers and the incentives it offers to distributors to promote its own brands. The Brewers Association, which represents 2,800 craft brewers, complained during a Senate hearing in December that those rewards effectively limit the sales of competing beers.

"If you want to grow your business as a craft brewer, if you want to get your beer into a chain store, if you want to get your beer into the stadium, you need to use the Anheuser-Busch distributor or the MillerCoors distributor," Bob Pease, the chief executive officer of the association, told lawmakers. "Those are the only two options in most markets that have the horsepower to effectively bring your beer to the retail market."

Spokesmen for the companies and the Justice Department declined to comment.

The Brewers Association has demanded the combined company divest its own wholesalers and change incentives to encourage the sale of competing beers. The smaller brewers don’t appear to be getting much traction in meetings with Justice Department officials about their complaints, said a fourth person familiar with the discussions.

In fact, most of the resources in the section reviewing the deal are dedicated to investigating the two pending mergers in the health-insurance industry - Anthem Inc.’s bid for Cigna Corp. and Aetna Inc.’s deal for Humana Inc. - another person said.

The merging companies offered early on to sell SABMiller’s stake in the MillerCoors joint venture to Molson Coors, ceding global control of Miller brands, to resolve any antitrust problems in the U.S. That makes it harder for the brewers to argue about competitive harm from the merger because AB InBev’s competitive position in the U.S. will be essentially unchanged.

The companies have also faced complaints from the International Brotherhood of Teamsters about the planned closure of a MillerCoors brewery in Eden, North Carolina, saying it would lead to higher prices.

AB InBev Chief Executive Officer Carlos Brito told lawmakers in December distribution won’t change as a result of the takeover. He committed to limiting the volume of beer distributed by wholly owned distributors to "around" 10 percent from between 7 percent and 8 percent currently. He also said there would be no termination of any distributor or renegotiation of contracts with distributors.

01 June, 2016