AB InBev pledges not to wield axe
Public interest issues not seen in SABMiller deal
NO South African jobs are expected to be lost as a result of the SABMiller acquisition, Anheuser-Busch InBev informed the Competition Commission this week. The proposed transaction would not give rise to any public interest issues, the commission was told in AB InBev’s filing.
The commission must now investigate the proposed transaction and consider input from affected parties such as employees, suppliers and customers. It will then make a recommendation to the Competition Tribunal and Economic Development Minister Ebrahim Patel.
AB InBev claims the megabeer deal raises no regulatory concerns, but competition analysts advise the company to look closely at the commission’s just released recommendations on the restructuring of four Coca-Cola bottlers in South Africa (including SABMiller) to create Coca-Cola Beverages SA.
The South African leg of the deal is part of an Africa-wide restructuring by Coca-Cola that was expected to be finalised some months ago. The conditions attached to the commission’s recommended approval are reminiscent of the controversial Walmart/ Massmart merger. They include undertakings to local suppliers; retrenchments limited to 250; establishment of a R500-million fund to develop retailers; and a R150-million fund to develop historically disadvantaged suppliers and farmers.
Meanwhile on Monday, the same day that it filed notice with the commission, AB InBev announced plans for a listing on the JSE in the middle of next month.
On the basis of its current market value on the Brussels Stock Exchange (and an exchange rate of around R16/à) AB InBev is set to be the most valuable listing on the JSE with a market cap of around R3-trillion. The next largest is British American Tobacco, with a market cap of around R1.7-trillion.
A JSE listing should help to overcome any local investor resistance there may be to AB InBev’s proposed $110billion (about R1.65-trillion) acquisition of SABMiller. Trevor Stirling of Bernstein Research said it addressed concerns South African shareholders, who account for around 10% of the total, might have about losing a local listing. “It will keep South African investment institutions on board,” said Bernstein, who added that in demonstrating a commitment to South Africa the move “delivers on a number of fronts”.
That commitment is all the more impressive given it was made in the eye of last week’s political storm when the investment community was reeling from the shock of dramatic changes to the National Treasury. At that stage foreigners were rushing to dump their South African exposure.
AB InBev’s resolve may reflect its own emergingmarket origins. In early October, shortly after announcing the mega-deal, its CEO Carlos Brito said he was optimistic about Africa’s long-term prospects. “Of course the road is bumpy right now, I’m from Brazil, I know about bumps in the road. Every five years there’s a wrinkle here and there but then it adjusts. The long-term trends are good for the continent,” Brito said.
Analysts have heaped praise on the company for the methodical way in which it is pre-emptively addressing possible concerns of regulators across the globe. It has already undertaken to sell off SABMiller’s 58% stake in MillerCoors and has announced it is looking into the disposal of SABMiller’s Chinese assets as well as a number of European brands.
However, the JSE listing and AB InBev’s assurance that no jobs would be lost may not be sufficient to address what could be the biggest challenge to regulatory clearance in South Africa — the Department of Economic Development. The conditions attached to approval of the Coca-Cola restructuring suggest the minister will be pushing hard to demonstrate he can extract conditions.
❛ Every five years there’s a wrinkle but then it adjusts. The long-term trends are good