AB InBev Will Take Over SABMiller—and Much of the Beer World – Wall Street Journal

Oct. 13, 2015 4:53 p.m. ET

Anheuser-Busch InBev BUD 2.10 % NV's planned $ 104.2 billion takeover of rival SABMiller SBMRY 5.59 % PLC will trigger antitrust scrutiny around much of the world but the Belgian brewing giant faces the biggest hurdles in the U.S. and China.

The two brewers together have a roughly 30% global market share by volume and regulators in countries from Argentina to Australia and South Korea to the Czech Republic could push for divestments.

AB InBev controls about 45% of the U.S. market through brands including Bud Light, Natural Light and Busch Light. The brewer would be widely expected to sell SABMiller's 58% stake in MillerCoors LLC, a joint venture with Molson Coors Brewing Co. TAP.A 10.13 % MillerCoors has roughly a 25% market share with brands including Coors Light and Miller Lite.

"That's like a merger of Ford, General Motors GM 0.33 % and Chrysler," said Ankur Kapoor, an antitrust lawyer with Constantine Cannon LLP in New York.

The U.S. Justice Department declined to comment on Tuesday.

The most likely buyer is Molson Coors, which has the right to increase its equity stake in MillerCoors to 50% at fair market value and rights of first refusal and final bid for the other 50%. SABMiller's stake in MillerCoors is estimated to be worth more than $ 10 billion.

Denver-based Molson Coors said Tuesday it is "watching with interest" but declined to comment further. Molson Coors could team up with another brewer or financial investor to shoulder the takeover cost. The company's shares surged 9.9% to $ 86.58 Tuesday on the New York Stock Exchange.

A bigger wild card is China, where SABMiller has a 23% market share through its joint venture with government-backed China Resources Enterprise Ltd. 0291 3.61 % , maker of the top-selling Snow brand. AB InBev has a 14% share with Budweiser and local brands, including Harbin, according to Euromonitor International.

Antitrust experts and industry analysts think Chinese authorities would hesitate at allowing a foreign company to control more than a third of the market and could require AB InBev to sell SABMiller's 49% stake—most likely to China Resources.

"I don't think AB InBev could have gone into this deal not having tested the waters with China Resources if they'd be interested in buying," said Caroline Levy, a beverage analyst in New York with CLSA, which values the 49% stake at $ 6 billion.

AB InBev said Tuesday that SABMiller's geographic footprints are "largely complementary" and that it would work with authorities to resolve regulatory reviews in a "timely" manner. In the U.S. and China, "we would seek to resolve any regulatory or contractual considerations promptly and proactively," the company added.

But SABMiller's board of directors is sufficiently concerned about regulatory roadblocks that it negotiated a $ 3 billion breakup fee if the deal doesn't close.

Outside of the U.S. and China, Susquehanna Financial Group estimated AB InBev would be required to divest less than 2.5% of the combined brewer's volumes.

But that doesn't rule out potential headaches in several countries. Regulators could require divestments of SABMiller units in Argentina, Mexico and South Korea, as well as AB InBev units in the Czech Republic, Peru, Ecuador and Australia because of combined market shares topping 40% in those countries, according to Susquehanna.

AB InBev could encounter antitrust pushback in several countries where the brewers' combined share would be below 40%, including the U.K., Italy, Netherlands and Hungary, Susquehanna added.

Margrethe Vestager, the European Union's antitrust chief, has been quick to challenge the world's biggest companies, warning repeatedly that mergers shouldn't hurt consumers. Her agency filed formal antitrust charges against Google Inc. and Gazprom in April.

AB InBev's planned takeover could face political resistance in South Africa, where globe-trotting SABMiller got its start. AB InBev is famous for its cost-cutting and the South African government's Public Investment Corp., a minority shareholder in SABMiller, said Tuesday it is "important'' that jobs in South Africa be preserved.

In the U.S., AB InBev has a history of tough scrutiny. The Justice Department blocked the brewer's planned $ 20.1 billion takeover of Mexico's Grupo Modelo SAB in 2013, arguing Modelo was an important competitor in the U.S. because of its popular Corona and Modelo Especial brands.

AB InBev eventually got the Justice Department to sign off on the deal—but not before agreeing to sell an additional $ 2.9 billion of assets to U.S.-based Constellation Brands Inc., STZ.B -1.09 % including the transfer of a Mexican brewery and perpetual licensing rights in the U.S. to five Modelo brands.

On Monday, AB InBev disclosed that the Justice Department has questioned its pending acquisition of two California distributors. Regulators are examining whether such acquisitions make it harder for small "craft" brewers to get their brands on U.S. store shelves.