AB InBev in merger talks with SABMiller

<p>Two of the world’s largest brewers are considering a tie-up.</p>

Two of the world's largest brewing companies – Anheuser-Busch InBev (AB InBev) and SABMiller - are discussing a possible merger. If the deal is successful, the resulting company would produce a third of the world's beer.

AB InBev includes brands like Budweiser, Stella Artois and Corona. It has 20.8 per cent of the global market share. SABMiller's product portfolio includes Peroni and Grolsch. It has 9.7 per cent of the global market share. Together, the two companies are expected to have a value of at least $230 billion (£150 billion), based on Tuesday's share price.

However, AB InBev has noted that there is no certainty that the two firms will reach an agreement. 

Analysts have anticipated a possible deal between the firms for some time, however AB InBev delayed the move due to high levels of debt caused by other purchases.

"Not a merger"

Commenting on the possibility of a deal between the two brewers, Larry Nelson, editor of trade magazine Brewer's Guardian said: "Let's get this straight, this is a takeover by AB InBev of SABMiller. It's not a merger."

He noted that given the size of the deal, both companies would probably have to sell off parts of their operations in order to get regulatory approval – this could mean sacrificing some of their business in the US and China.

"In the US, SABMiller has a joint venture with Molson Coors, which gives it a 25 per cent share of the market ant makes it a clear number two," Mr Nelson pointed out.

He explained that combining with AB InBev would result in a firm that has a 75 per cent market share in the US, "which is clearly untenable".

"AB InBev would not have gone into this without having some plan of what they want to divest," he added.

It's also likely that the merged company would work to move into faster growing markets like South Africa, South America and Mexico, reports the BBC.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.