Beer deal could fuel a round of M&A in China

BIG Beer's most monstrous deal yet could fuel an overdue round of M&A in China. If Anheuser-Busch InBev can swallow US$90 billion rival SABMiller, complete with its 49 per cent stake in Chinese market leader CR Snow, others in the Middle Kingdom may seek tie-ups. Alternatively Snow's other owner, China Resources Enterprise (CRE), might take full control and mop up smaller brewers itself.

Adding Snow to AB InBev's collection of beer brands would boost it greatly in China. Susquehanna analyst Pablo Zuanic calls China's best-selling brew the "most strategic part" of the proposed AB-SAB union. The Budweiser producer's local tipples include Sedrin and Harbin, a favourite in the chilly north-east. The deal-machine has already set its sights on being No. 1 in Asia, which means it must win in China.

Uniting would mean a huge leap in market concentration - Snow had 23 per cent of the market by volume last year to AB InBev's 14 per cent, CRE said. The combination could cause others, like second-placed Tsingtao and fourth-ranked Beijing Yanjing, to consider mergers. The two companies are worth about US$6.4 billion and US$3.3 billion respectively, based on Sept 16's closing share prices.