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Megabrew deal may fall flat with Australian regulators
[SYDNEY] Australian regulators are likely to raise concerns over the planned US$100 billion-plus takeover of SABMiller by rival Anheuser-Busch InBev, wary of the impact on competition from a combination of the country's No.1 and No.3 brewers.
After a long courtship, SABMiller agreed on Tuesday to a deal that would brew almost a third of the world's beer and rank in the top five mergers in corporate history.
A SABMiller/AB InBev beer behemoth will control around 46 percent of Australasia's 2 billion litre beer market, according to figures from Euromonitor, a smaller percentage than some other markets such as the United States, Peru and Argentina.
However, the Australian Competition and Consumer Commission (ACCC) has long been wary of deals where the top three players are cut to two, said Allan Fels, a former chairman of the commission. "This deal will not have an easy ride through the ACCC,"Fels told Reuters. "The battle between second and third position often stimulates competition more generally in the market... In this case it's not clear there is a lot of surrounding competition, and therefore it could be that a cosy duopoly emerges." With brands including Victoria Bitter and Carlton Draught, SABMiller is Australia's biggest brewer with around 38 per cent market share, followed closely by Kirin Holdings Co Ltd on 32 per cent with its stable of beers including local favourites XXXX and Toohey's.
After AB InBev, which has 8.5 per cent of the Australian beer market with brands such as Corona and Becks, the next biggest brewer, privately owned Coopers Brewery, has just a 3.6 per cent share. "If there is evidence that the No 3 is likely to grow and be an effective competitive constraint against the big two, then that would suggest that there could be concerns," said one competition lawyer, who asked not to be identified.
The merger is expected to have repercussions for the rest of the industry, particularly in the United States where the two companies would have about 70 per cent of the beer market unless they sell off some assets.
Analysts say the combined group might also have to sell interests in China, where SABMiller's CR Snow joint venture with China Resources Enterprise is the market leader. "It's conceivable that the merger is blocked internationally, but if it's not, if it sails through overseas but is blocked here, they'd have to consider calling off this part of the transaction," said Fels, who was chairman of the ACCC until 2003 and is now an economics professor at the University of Melbourne.