BEE block to brewer

Union vows to fight AB InBev and SABMiller merger if em­pow­er­ment scheme is not hon­oured

CityPress - - Business - DEWALD VAN RENSBURG dewald.vrens­burg@city­press.co.za IMD’s world com­pet­i­tive rank­ings

So far, only one stake­holder has raised a red flag over the Com­pe­ti­tion Com­mis­sion’s con­di­tional ap­proval of the $108 bil­lion (R1.7 tril­lion) megamerger be­tween An­heuserBusch InBev (AB InBev) and SABMiller. The Food and Al­lied Work­ers’ Union (Fawu) has promised to chal­lenge the BEE con­di­tion­al­ity when the com­mis­sion’s rec­om­men­da­tion ar­rives at the Com­pe­ti­tion Tri­bunal for rat­i­fi­ca­tion.

The union had ear­lier de­manded that SAB’s Zen­zele em­pow­er­ment scheme, which in­cludes an em­ployee share own­er­ship pro­gramme, gets paid out early when the merger oc­curs.

Like many broad-based schemes, Zen­zele en­tails in­di­rect own­er­ship of shares that will “vest” and be­come real trade­able shares af­ter a lock-in pe­riod.

That vest­ing is in 2020, but Fawu wants it ac­cel­er­ated in line with the ac­cel­er­ated ex­er­cise of ex­ec­u­tive share plans that form part of the merger.

The com­mis­sion’s con­di­tion on BEE, how­ever, ad­vo­cates more or less the op­po­site. It de­mands that the merged com­pany main­tain its black own­er­ship and timeously cre­ate a re­place­ment for Zen­zele be­fore the 2020 vest­ing date.

Fawu has promised to ar­gue its case at the tri­bunal and even take it to the Con­sti­tu­tional Court if need be.

The other im­por­tant con­di­tion on the merger is that the com­pany get rid of SABMiller’s 26.5% in­ter­est in listed al­co­hol group Dis­tell. The shares in Dis­tell are worth about R9 bil­lion and the merged com­pany has three years to get rid of them.

Dis­tell is the av­enue through which SAB has cider brands in the lo­cal mar­ket. AB InBev has also re­cently been build­ing up a cider busi­ness and the com­mis­sion was wor­ried that com­pe­ti­tion would suf­fer when AB InBev gains in­flu­ence on the Dis­tell board.

Dis­tell’s ma­jor­ity share­hold­ers, Rem­gro and Capevin Hold­ings, al­ready said they would act “in the best in­ter­ests” of their own and Dis­tell’s share­hold­ers. They said they “will await SABMiller’s re­sponse to the afore­said con­di­tion and, with due con­sid­er­a­tion to the rights they have, act in the best in­ter­est of Rem­gro, Capevin Hold­ings, Dis­tell and their re­spec­tive share­hold­ers”.

This sug­gests that they have the first right to buy the shares when SABMiller sells them.

The an­nounce­ment of the con­di­tion saw Dis­tell’s share price rise 3% dur­ing the week.

In Eu­rope, the com­pe­ti­tion au­thor­i­ties got AB InBev to agree to sell all of SABMiller’s beer busi­nesses on the con­ti­nent. Many of these have al­ready been sold to Ja­panese ri­val Asahi Brew­eries. An­other con­di­tion im­posed on the merg­ing com­pa­nies is that they do not use their own­er­ship of the fridges in liquor stores or bars to keep out smaller brew­eries. In out­lets that only have AB InBev-owned cool­ers, 10% of one fridge must be open for the smaller brands. This would have lit­tle ef­fect on the craft-beer sec­tor as far as bars, tav­erns and in­de­pen­dent liquor stores were con­cerned, said Ja­son Cedar­more, owner of Craft Liquor Mer­chants. The com­pany dis­trib­utes about 60% of the coun­try’s craft beers. Ac­cord­ing to Cedar­more, there had not re­ally been a prob­lem with ac­cess­ing in­de­pen­dent stores or bars, though the 10% con­di­tion might help when there were ne­go­ti­a­tions with the big re­tail­ers such as Makro or Pick n Pay, he told City Press. The com­mis­sion’s re­main­ing de­mands of the merg­ing beer giants are mostly un­sur­pris­ing. They in­clude the com­mit­ment to pro­vide R1 bil­lion in fund­ing, over five years, to emerg­ing black farm­ers in the brew­ing value chain that had ear­lier been ne­go­ti­ated with Eco­nomic De­vel­op­ment Min­is­ter Ebrahim Pa­tel.

The other con­di­tions by and large en­tail not chang­ing SABMiller’s cur­rent op­er­a­tions in South Africa too much.

The new merged gi­ant has agreed to con­tinue: its sup­ply of metal bot­tle caps to com­peti­tors in South Africa through Coleus Pack­ag­ing; sup­ply­ing com­peti­tors from its hops and bar­ley farms; the cur­rent pro­por­tion of lo­cal pro­duc­tion; hon­our­ing con­tracts with its sup­pli­ers; and its owner-driver pro­gramme.

There will be no re­trench­ments re­lated to the merger in South Africa, promised AB InBev.

Be­cause SAB has a per­va­sive dis­tri­bu­tion sys­tem in South Africa, it is likely that AB InBev will ditch its cur­rent lo­cal dis­trib­u­tor, DGB. Any­one who loses a job there as a re­sult will get hired by the merged com­pany.

In an­other de­vel­op­ment, Bloomberg re­ported this week that the US jus­tice de­part­ment was poised to ap­prove the merger of AB InBev and SABMiller, as long as the beer be­he­moth agreed not to edge craft brewers off shelves.

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