A SABMiller Takeover Would Shake Up Big Industry – New York Times

After years of speculation, Anheuser-Busch InBev has at last approached its rival SABMiller about a takeover that would create the world's largest beer company. A deal would crown years of global consolidation of the brewing industry and incite a climactic round of regional disposals, spins and amalgamations.

With a market value of $ 91 billion, SAB would be the biggest acquisition yet by Carlos Brito, the company's chief executive. Starting with a regional player in Latin America supported by the wily founders of 3G Capital, Mr. Brito merged with the Belgian brewer InBev, and eventually purchased Anheuser-Busch, the maker of Budweiser, six years ago.

Mr. Brito's skill at cost-cutting is allowing Anheuser-Busch to turn nearly 40 percent of its revenue into earnings before interest, taxes, depreciation and amortization, or Ebitda, in the current year, according to Thomson Reuters data. That's nearly twice the peer median. SABMiller, led by Alan Clark, has a 30 percent Ebitda margin, although it is fast improving. Heineken trails at 23 percent and and Carlsberg is at 20 percent.

This track record may give Anheuser investors confidence to fund the deal, which at a 35 percent premium to SABMiller's undisturbed stock price would come in at $ 100 billion. SABMiller is 41 percent held by two large shareholders, Altria and the Santo Domingo family of Colombia, who would be likely to accept equity in the combination. That still leaves Anheuser-Busch needing to find another $ 59 billion or so to get the deal done.

Gaining approval from antitrust watchdogs, however, may be more complicated than appeasing shareholders. In the United States, Anheuser-Busch would almost certainly need to flog its 58 percent stake in the MillerCoors joint venture, presumably to its partner Molson Coors. In China, SABMiller's Snow brand may also need to find a new owner.

These and other mandatory disposals might give opportunities to Heineken, Carlsberg and Diageo, the owner of Guinness. Equally, the financial returns generated by "ABSAB" might force the family-controlled Heineken and Carlsberg, which is controlled by a foundation, to reconsider their own market positions.

Whatever the case, a successful merger of Anheuser-Busch InBev and SABMiller would charge up the beer industry like never before.