Although it has long been the prevailing opinion that Anheuser-Busch InBev (ABI) would pursue SABMiller, I don’t believe this to be so for the
- Synergies much lower than prior deals as percentage of ultimate price required
- Anti-trust issues in two large geographies: the United States and China
- SABMiller EBIDTA margins of approximately 20 percent are lower than ABI’s usual 40 percent targets when it enters new markets
- Complexity of Africa with a large non-drinking Muslim population, poor infrastructure and affordability of beer, making it unable to provide desired margins
- Large European business footprint, which ABI is trying to divest, other than Belgium and Germany
- Weak competitive position in Australia
- Most importantly, no detailed insider information on SABMiller before consummating any deal, which is very dissimilar to Anheuser-Busch (where both InBev and A-B were sharing best practices and InBev knew where the opportunities were before deal was completed) and Modelo (A-B had 50 percent ownership and board seat resulting in insider understanding of company)
Furthermore, recent issues have surfaced further strengthening my position, including the following:
- The new deal between SABMiller and The Coca-Cola Co. in Africa presents another issue. I am certain Coke has a change of control provision, so that revenue stream would be eliminated. My presumption is that the value paid in a takeover for this business will be less than what The Coca-Cola Co. would have to pay to buy back SABMiller’s equity interest.
- Since the deal for Modelo was completed, G3 was formed between Warren Buffet and the Brazilian investor in ABI. Initially, these investors put most of their capital in ABI; however, that is no longer the case. With G3 buying Heinz, Burger King, and soon Tim Horton, billions of dollars are flowing into a new investment vehicle. There is no longer a need to grow wealth and influence through ABI.
- For the Brazilian owners of ABI, buying another beer company is the end of the road for sustained growth in beer. This is not a particularly disruptive, game changing, legacy. It proves that they were great consolidators but there have been many others in business history and they will not be the first.
I believe that ABI will be looking for trans-formative capability acquisitions going forward. SABMiller, in my point of view, does not fit.