BEE block to brewer
Union vows to fight AB InBev and SABMiller merger if empowerment scheme is not honoured
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.