The beer world is once again becoming an empire. AB InBev has offered to purchase SABMiller to the tune of $107 billion. The merger will reportedly result in $1.4 billion in annual savings 4 years after the merger is complete. Once the deal has gone through, SABInBev (or whatever their name will be) will now essentially produce one out of every 3 beers worldwide.
Now I know what you’re thinking, will there really be a company that houses both Budweiser and Miller? the answer is no.
With the purchase of the company, SABMiller will relinquish its 58% stake in MillerCoors to its venture partner Molson Coors Brewing. This will give Molson Coors control of the Miller brand, allowing them to bottle and sell it worldwide. In addition to Miller, MillerCoors also brews Miller Light, Blue Moon, and Coors. Molson Coors is buying the stake for $12 billion and MillerCoors will now become a subsidiary of the larger company. Molson Coors will now be in control of import beers Pilsner Urquell and Peroni. This addition of the Miller portfolio would essentially double Molson Coor’s business as ABInBev relinquished market power in the US.
The whole premise of the MillerCoors dealing to Molson Coors Brewing is based on regulation. AB InBev and SABMiller were worried that without dealing SABMiller’s stake in MillerCoors that the Department of Justice would be likely to block the deal. AB InBev controls 45% of the US beer market and with the additional 25% that MillerCoors has would be likely to cause a monopoly and thus an end to the potential merger.
Erik Gordon from the University of Michigan commented on the deal and the possibility of a Department of Justice block by saying,”It’s easier for businesspeople to reach agreements with each other than to reach an agreement with regulators,” he said. “Regulators get no reward for reaching an agreement but get praised for being tough.”
The new giant will dwarf its next largest competitor as Heineken has 9% of the global market. The new company will now be able to tackle its largest and most challenging markets of China and Africa. China consumes almost a quarter of the world’s beer and the new company is hopeful that their new presence will bring them success.