Brazilian owned AB InBev has entered into talks to takeover SABMiller. If successful, the move would enable it to dominate the world’s global beer market with a combined worth of at least $230bn. AB InBev’s bid has not yet been disclosed, although industry experts predict that it could be anywhere in the excess of SABMiller’s current market value, $75bn.
Speculation has been rife for over a year that the two companies would merge to form a group that brews one third of the world’s beer
Speculation has been rife for over a year that the two companies would merge to form a group that brews one third of the world’s beer. At present, AB InBev leads the global market with 45 percent, while London-based SABMiller boasts 25 percent with well-known brands such as Coors, Fosters and Grolsch, among numerous others.
Given the size of both companies, it is expected that AB InBev will have to sell several assets in order to comply with anti-trust rules, which could see it sacrifice some of its market share in China. Yet the acquisition will enable the Brazilian group to strengthen its presence in Africa considerably as SABMiller has brewing operations in 17 countries and distributes in a further 21 on the continent.
Over the past year, both companies have suffered significant setbacks in terms of sales and share prices. Despite its market dominance, AB InBev’s profits plummeted by 32 percent in this year’s second quarter. This downturn can be largely attributed to Brazil’s struggling economy and changing consumer tastes in North America and Europe, which is seeing a growing trend for wine and spirits.
The reaction to the news has been generally positive, with an increase in share prices for both companies – 21 percent for SAB Miller and 8 percent for AB InBev, according to CNN Money.
In accordance with UK acquisition rules, if AB InBev does not make a formal offer by October 14 it must exit the talks.
