SABMiller acquisition ‘on track’

South Africa clears AB InBev’s $100-billion deal to acquire SABMiller - and the merger could be completed within six months.

Johannesburg - South Africa has cleared Anheuser-Busch (AB) InBev’s $100 billion-plus (over R1.4 trillion) deal to acquire SABMiller yesterday, putting the world’s largest brewer “on track” to complete the merger within the next six months.

Read also: Trib okays SABMiller takeover

The Competition Tribunal said that concessions made by AB InBev to get the deal approved were designed to address both public interest and competition concerns arising from the merger.

The merger will bring together AB InBev’s Budweiser, Stella Artois and Corona brands with SABMiller’s Peroni, Grolsch and Pilsner Urquell and brew almost a third of the world’s beer, dwarfing rivals Heineken and Carlsberg

Having secured South Africa’s approval for the deal, AB InBev chief executive Carlos Brito said it was on track to close the merger in the second half of this year, adding that South Africa was “a market that would play a critical role in the combined company”.

Brito said AB InBev would live up to its commitments on jobs and employment, seeking local inputs and sticking to plans meant to give black people a larger role in the business.

AB InBev shares were suspended before the announcement.

Analysts and investors who have been nervous about opposition from South African unions and expected delays from the regulators were relieved after the announcement.

“The reality is that this is a big company that cannot afford to get this deal delayed. It’s great news that it’s all done and dusted,” said Lentus Asset Management chief investment officer Nic Norman Smith.

As part of the conditions, the tribunal ruled that no South African employee could be laid off for five years after the merger.

Conditions include a change in the timing of the sale of SABMiller’s R9.4bn take in South African drinks maker Distell Group, the Competition Tribunal said yesterday, after Distell said at the tribunal hearing last week that the recommended three-year deadline was too distant.

Distell told the hearing that the timeframe to offload the 26 percent stake would create uncertainty for the company. Remgro, the investment company of South African billionaire Johann Rupert that jointly owns a controlling stake in Distell, would be interested in buying SABMiller’s shareholding, it said last year.

Competitors

Distell shares gained 1.13 percent to R161.80 by market close yesterday, valuing the company at about R36bn.

The other alteration to the Competition Commission’s recommendations relates to access rights of competitors to fridge space supplied by AB InBev-SABMiller. Conditions also include investing R1bn in South African agriculture and enterprise development.

The conditions outlined by the tribunal were largely unchanged from those recommended by the Competition Commission last month.

Chris Charter, a director of competition law at Cliffe Dekker Hofmeyr, said yesterday that the conditions were wide ranging and covered a multitude of issues and it would be a challenge for both parties to ensure compliance and the Competition Commission to monitor. “Many of the conditions protect stakeholders so there will be an element of monitoring by complaint if the parties do not get it right.”

Since the deal was announced in November, AB InBev has completed a secondary listing on the JSE, lined up debt financing and addressed anti-trust concerns in the US, Europe and China with proposed asset sales.

The two key approvals required are by the US and China, although the proposed disposals there are expected to lead to clearance. Australia and Europe have already given their blessing to the deal.

But AB InBev faces an EU antitrust investigation into practices that might prevent cheaper Dutch and French beer being sold in its home market of Belgium, the European Commission also said yesterday.

The world’s largest brewer is seeking regulatory approval for the takeover as investors count down to the key date of August 12, when London-based SABMiller is scheduled to pay its dividend.

AB InBev will get the payout if the deal is completed by then, although neither company anticipates the deal will close before that date. The acquisition is poised to get the go-ahead from the the US Justice Department and China’s Ministry of Commerce.

Approval

“It’s another tick in the box as they progress to completion,” Andrew Holland, an analyst at Société Générale, said. “There’s certainly no antitrust or competition reason for any hold-up in China or the US.”

The deal would take about three months to complete after the last regulator approved the acquisition, meaning there was “absolutely no chance” of it being finished before SABMiller paid its dividend, he said.

SABMiller shares declined by 2.06 percent yesterday to close at R847.52 on the JSE.

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