Merger takeover rumours have been swirling around the stock markets for months. One recent one had Diageo as a possible merger partner to the South African brewer.
AB InBev’s statement says: “AB InBev confirms that it has made an approach to SABMiller’s board of directors regarding a combination of the two companies. AB InBev’s intention is to work with SABMiller’s board toward a recommended transaction.
“There can be no certainty that this approach will result in an offer or agreement, or as to the terms of any such agreement. A further statement will be made as appropriate.”
The problem, if that is what you can call it, is that beer drinking in these companies’ mature markets is at best flat, if not declining. There is still plenty of opportunity for brewers in eastern and central Europe and Asia but that is the future. There is also the emergence and growth in the so-called ‘craft’ sector of micro and boutique brewers.
The here and now is that the owners, the shareholders, of these huge multi-national brewing companies demand growth, healthy profits and substantial dividends. The sobering reality is that these companies, along with the likes of Diageo, are just not delivering the results their shareholders are looking for.
Hence banks, pension fund managers, city analysts start looking for, and clamouring for, a deal. A merger or takeover means fat fees for banks and their various advisors including lawyers and accountants.
The likes of Allied-Domecq, then the second largest drinks comany in the world, and UK supermarket chain, Safeway. Perfectly well run, profitable companies went to the wall. Allied-Domecq was carved up by rivals, like Seagram before, and Safeway was taken over by a reluctant Morrisons which had never doneanything like that before and nearly sank itself under the weight of the deal.
Bloombery News’s Janice Kew comments that a takeover of SABMiller Plc by larger competitor Anheuser-Busch InBev would further distance the London-based company from its 19th century roots as a South African provider of beer to thirsty miners on the Johannesburg gold reef.
The maker of local staples such as Castle Lite started life as South African Breweries in 1895, and became the first industrial company to list on the Johannesburg Stock Exchange two years later. By the middle of last century, the brewer controlled 98% of its home market, before expanding internationally after the end of white-minority rule in 1994.
The company’s first significant break from South Africa came with the move of its primary listing to London in 1999. Three years later it bought the Miller Brewing Company, the second-largest beer maker in the US, and has added Grolsch and Peroni to its portfolio.
SABMiller now has 70,000 employees in more than 80 countries, and would be swallowed into Leuven, Belgium-based AB InBev if the brewer of Budweiser and Stella Artois completes a multi-billion dollar deal.
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