On Thursday 25 October AB Inbev announced that it will cut its dividend payment in half. In the background is its acquisition of SABMiller (and the accompanying spinoff of Miller Coors to the Canadian firm Molson, because even with a pro-business bias, the US Fair Trade Commission would not allow a merger that would give a single firm a 70% market share.
- How has that merger fared?
- Or is the dividend cut due to factors unrelated to the merger?
One piece of information is what’s been happening to the overall market. If we look at market shares, we can calculate that the main slice on which AB Inbev focuses changed by -2.3% in 2017. Alternatively, “regional” brewers production peaked at 19.0 million barrels in 2015, but was down to 17.9 million in 2017 (or -5.8% over 2 years); data from the Brewers Association.
- So did the AB Inbev M&A strategy make sense?
- Or did it merely overpay?
- Or has it hit a temporary rough patch (eg, rising interest rates making it more important to repay than to rollover debt)?
- Or did it fail to foresee the extent to which beer demand was falling so that it may be better off post-merger, but the merger wasn’t helpful enough to offset the secular decline in beer consumption?
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