Drunk on Power? The “Megabrew” Merger and Competition Law

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SABMiller, the world’s second largest brewer and makers of numerous well-known brands including Peroni and Fosters, has agreed in principle to the key terms of a £68bn takeover deal by its foremost competitor – the largest brewing company in the world AB InBev.

After rebuffing AB InBev’s advances on several occasions over the past month, SABMiller’s board have now indicated their agreement with an offer £44 per share, which represents a significant premium of around 50% over and above the value of SABMiller’s shares before rumours of a takeover first emerged in mid-September.

If the proposed takeover is completed it will be the latest in a series of aggressive expansions by AB InBev over the past decade, the brewer having already snapped up the makers of Stella Artois and Budweiser amongst others. The end result will be the creation of a brewing behemoth that would dominate beer markets across the world and make approximately one third of the world’s beer.

The deal will inevitably be of great interest to guardians of competition law across the world. This scrutiny will be fiercest in the USA where AB InBev has already faced considerable resistance from the Department of Justice. In 2013 the DoJ initially blocked AB InBev’s much smaller acquisition of Corona brewer Grupo Modelo, and it is currently investigating allegations that AB InBev are deliberately buying up distributors to stymie the growth of booming craft beer industry.

If the SAB Miller takeover is completed it is estimated a combined group will cover 78 per cent of the US market, a share that will no doubt be unpalatable for the regulators. It is therefore widely acknowledged that the new conglomerate will have to sell off, or “divest”, some of its business to satisfy the authorities. The most likely example of this would be the sale of MillerCoors to Molson Coors – SABMiller’s joint venture partner in MillerCoors who have a first right of refusal for any sale of the business. Interestingly, one of the key terms of the deal is a clause that provides for a $3bn break fee payable by AB InBev if the deal falls through because of competition restrictions.

The takeover first must be concluded, however, and AB InBev now have until 28 October 2015 to formalise their offer. Even if matters progress smoothly from here to completion, the spectre of competition legislation across the globe is likely to hang heavily over the deal for some time to come.

If you require any advice or assistance on Corporate and Restructuring matters please do not hesitate to Pauline Rigby either by email at pauline.rigby@forbessolicitors.co.uk or on 0800 321 3258.

Pauline Rigby

About Pauline Rigby

Pauline Rigby is Head of the Corporate and Restructuring team at Forbes Solicitors. Pauline’s blogs cover a wide range of corporate issues, specifically areas including company formation, banking, joint ventures and shareholder matters, contractual matters and equity fundraising or investing.
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