‘Stars have aligned’ for AB InBev’s megabrew deal

Anheuser-Busch InBev’s chief executive says a study of SABMiller’s African beer markets and talks with top shareholders led to an “alignment of stars” that drew it to its nearest rival.

But observers say the real catalysts for the $100bn takeover proposal made public on October 7 are a steep fall in SABMiller’s share price, search for growth beyond AB InBev’s declining core Americas markets, and a desire not to give SABMiller’s new management enough time to execute a workable defence.

Analysts have speculated on the tie-up of the world’s top two brewers for years.

Chief executive Carlos Brito told a conference call last week that his company has been eyeing its rival for “quite a while”.

In the last few months though, AB InBev has done ‘deep dive’ studies of the top nine African markets, which would include SABMiller markets such as South Africa and Nigeria.

AB InBev’s larger shareholders, principally Belgian and Brazilian families, have also approached SABMiller’s two main investors, cigarette-maker Altria and the BevCo company of Colombia’s Santo Domingo family, which together own 40.5% of the UK-based brewer.

“Those two things were not the case a year ago, knowledge about Africa and knowledge about the intentions of those two shareholders, in terms of them being at least receptive to an approach,” Brito said, while acknowledging that BevCo had not given its support to his proposal.

SABMiller has called the approach “opportunistic”, timed to take advantage of a double-digit decline in its share price in July and August, depressed by weaker emerging market currencies.

“They saw an opportunity and they jumped on it,” said Morningstar analyst Phil Gorham.

Looking back, AB InBev’s shares have outperformed those of its target since 2010, meaning AB InBev’s market capitalisation has swollen to beyond twice that of SABMiller from 1.6 times five years ago.

Everything you need to know about SABMiller in 60 seconds http://t.co/4AVyaNvo1w pic.twitter.com/cJNKmF8cCD

— Bloomberg (@business) October 12, 2015

That has made a purchase easier to fund.

While the share price may explain the exact timing, analysts say AB InBev’s own performance woes and changes at SABMiller also played a role.

In just over a year, the world’s second largest brewer has replaced its chairman, chief financial officer, and the head of its US joint venture MillerCoors.

Chief executive Alan Clark has only been in place since April 2013, succeeding long-standing leader Graham Mackay who has since died.

“It’s well-known that the management is not as stable as it used to be,” said Berenberg analyst Javier Gonzalez Lastra.