Beer merger: bet­ter deal de­manded

CityPress - - Business and Tenders - JUSTIN BROWN justin.brown@city­press.co.za

The pro­posed con­di­tions for the merger of SABMiller and An­heuser-Busch InBev (AB InBev) to cre­ate the world’s largest beer maker came un­der fire this week.

The most vig­or­ous as­sault on the con­di­tions stip­u­lated by the Com­pe­ti­tion Com­mis­sion came from Dutch beer com­pany Heineken, which said it had a local mar­ket share of up to 10%.

At a Com­pe­ti­tion Tri­bunal hear­ing into the pro­posed merger – held in Pretoria on Thurs­day – An­thony Nor­ton, an at­tor­ney rep­re­sent­ing Heineken, de­scribed the con­di­tions as “vague”, “am­bigu­ous” and “to­tally ir­ra­tional”.

The con­di­tions pro­posed needed to be framed more pre­cisely, he said.

A key area of con­cern, raised by a num­ber of par­ties, was that th­ese con­di­tions did not pro­vide enough con­tin­u­ing over­sight into whether the new com­pany com­plied with the con­di­tions that would ul­ti­mately be set down.

Nor­ton said that AB InBev should re­port to the pub­lic at large about its com­pli­ance pro­gramme with the merger con­di­tions.

Nor­man Manoim, the tri­bunal’s chair­per­son, sug­gested that a lay per­son’s man­ual be cre­ated to in­di­cate what merger con­di­tions were al­lowed.

The com­mis­sion has rec­om­mended that the merged en­tity have a com­pli­ance pro­gramme within six months.

But Heineken called for com­pli­ance to be ef­fec­tive within one month.

Tebogo Khaas, of the non­profit or­gan­i­sa­tion SA Small, Medium and Micro En­ter­prises Fo­rum, which he said had 2 000 mem­bers, also stressed the need for the tri­bunal to mon­i­tor the merged en­tity to en­sure it kept to the spirit and let­ter of the con­di­tions that were ul­ti­mately set down.

Th­ese ideas also won sup­port from Tshidiso Mokhoanatse, the leader of the po­lit­i­cal party Agency for New Agenda and the Black Busi­ness Fo­rum.

Mokhoanatse was con­cerned that the im­ple­men­ta­tion board might only meet once, and af­ter one year. “This is quite scary, given what could hap­pen in the first year,” he said.

Mokhoanatse said the new com­pany would need to ad­dress the is­sue of racial ex­clu­sion in South Africa.

Nor­ton ac­cused SABMiller, which he es­ti­mated had a local beer mar­ket share of up to 90%, of “dirty tricks”.

He al­leged that th­ese tac­tics in­cluded re­mov­ing and de­fac­ing com­peti­tors’ sig­nage and mar­ket­ing ma­te­rial, and plac­ing higher-priced stick­ers over their ad­ver­tised prod­uct prices.

AB InBev and SABMiller, the world’s two largest beer pro­duc­ers, are look­ing to merge in a deal worth $108 bil­lion (R1.7 tril­lion).

Nor­ton said that the tri­bunal needed to en­sure that the con­di­tions it set for the merger did not elim­i­nate com­pe­ti­tion.

He went on to warn that the new en­tity’s greater ac­cess to cap­i­tal could see it en­gage in preda­tory tac­tics.

Heineken also raised the prospect that the new com­pany could shut out com­peti­tors from re­tail­ers as well as cold stor­age space.

Heineken took ex­cep­tion to the fact that SABMiller had of­fered 10% of its re­frig­er­a­tion space to craft brew­ers, and a fur­ther 10% for Dis­tell’s ciders.

“Dis­tell is the largest cider pro­ducer in South Africa, with more than 50% mar­ket share. It is not some micro-brewer lurk­ing on the street cor­ner, yet they [SABMiller] are will­ing to say that the big­gest cider pro­ducer in the coun­try ... can get 10% of their fridge space, but Heineken – with 8% to 9% [local mar­ket share in the beer mar­ket] – can­not. It is to­tally ir­ra­tional.”

Jan­nie de Vil­liers, CEO of Grain SA, which rep­re­sents local grain farm­ers, said farm­ers wanted SABMiller’s as­sur­ance that it would con­tinue to pur­chase local bar­ley af­ter the merger rather than sub­sti­tute it with cheaper im­ports.

SABMiller is the sole local buyer of bar­ley out­put, which is used in the mak­ing of beer.

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