Beer giant might lose world’s favourite brew
In creating the world’s biggest beer company, Anheuser-Busch InBev may need to let go of the planet’s bestselling beer, China’s Snow.
That’s among the probable outcomes Guotai Junan Securities anticipates in the wake of AB InBev’s agreement to buy SABMiller for $106-billion. Analysts at the Goldman Sachs Group, BNP Paribas and Daiwa Capital Markets have also pointed out the likelihood of such a scenario in recent notes to clients.
The idea is that the merger would give the Belgian company about 40% of China’s beer market — too much for regulators’ comfort — and result in the disposal of a joint-venture stake back to China Resources Enterprise. SABMiller’s 49% stake in the venture, called China Resources Snow Breweries, could be worth about $5-billion, according to Nomura Holdings.
“Antitrust issues would be the biggest barrier for the purchase,” said Guotai Junan’s Andrew Song. “If the deal is completed, the combined market share of AB InBev and China Resources may trigger an antitrust review.”
For the maker of Budweiser, unloading the Chinese venture would be akin to forfeiting leadership in a market that researcher Euromonitor estimates will grow more than 50% to 279.7-billion yuan by 2019. Snow, which had a 23% share of China’s market last year, outsells all other beers globally after overtaking Bud Light in 2008, and the company produces enough liquid to fill about 12 Olympic-sized swimming pools every day, according to SABMiller’s website.
Vincent Tse, a spokesperson for China Resources Enterprise, declined to comment on how an AB InBev-SABMiller deal would affect his employer. The company will respond accordingly based on the merger conditions and China’s antimonopoly law, the chief financial officer, Frank Lai, was quoted as saying by Hong Kong’s Apple Daily.
AB InBev has thought through the regulatory implications of the proposal and the company would seek to resolve any contractual or regulatory issues if they emerge, said Karen Couck, its spokesperson.
If the stake is for sale, potential buyers could include Heineken, which has no presence in China, and Kirin Holdings, China Resources Enterprise’s joint venture partner in soft drinks, Nomura analyst Satoshi Fujiwara wrote in a report.
The AB InBev-SABMiller deal will be closely watched by Chinese regulators, said Zhaofeng Zhou, an antitrust lawyer at law firm Bird & Bird in Beijing.
China has blocked deals involving foreign companies before, though not often. In 2014, it rejected a proposed three-way alliance between the Danish shipping line AP Moeller-Maersk, Dublin-based Mediterranean Shipping and the French shipping company, CMA. The most high-profile case was in 2009 when it barred Coca-Cola’s $2.3-billion bid for the China Huiyuan Juice Group.
But, in 2008, China gave a conditional approval for InBev to complete its $52-billion takeover of Anheuser-Busch, barring the acquirer from raising stakes in existing units or buying shares of new brewers, including the maker of Snow beer.
China’s ministry of commerce, which reviews the legality of mergers, didn’t immediately respond to faxed queries.
“As long as they are prepared to divest their investment or their shares, I think it should be okay although it’s really hard to say because this deal is massive,” Bird & Bird’s Zhou said.
SABMiller has been producing Snow beer with China Resources Enterprise since 1994. Should AB InBev be forced to sell, China Resources Enterprise is likely to buy the stake from the brewer because of the sales potential in the world’s second-largest economy, said Duncan Fox, an analyst with Bloomberg Intelligence.
“If the economy grows, they should be the main winner,” Fox said. “Have they learnt all they can from the joint venture with SABMiller? Probably yes.”
After China Resources Enterprise, Tsingtao Brewery was the second-largest beermaker in China last year with an 18% share by volume. AB InBev, whose brands include Budweiser, Harbin and Sedrin, ranked third with 14%, according to Euromonitor. — © Bloomberg