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10.21.2015

Business valuation was key to major beer industry acquisition

Two of the largest beer makers in the world will combine if a recent acquisition is approved by regulators. According to a recent news report, Anheuser Busch InBev will acquire the stock of U.K. brewer SABMiller to create the world’s largest beer company. InBev, which makes Budweiser, and SABMiller, whose brands include Miller Genuine Draft, are currently the top two brewing companies in the world. The combined company would control almost one-third of the global market for beer.

SABMiller rejected some previous offers that they believed undervalued their business. Its directors unanimously approved the proposed deal, which values each share of the company at 44 British pounds. The two largest shareholders of SABMiller, Colombia-based BevCo and cigarette maker Altria, together own 41 percent of the company. Under the proposed takeover they would get a combination of stock in the new company and cash in exchange for their shares.

The beer industry has been flat worldwide in recent years and has been declining in some areas. Craft beers, along with wine, have been making inroads into the consumer market that was once dominated by large brewers. As a result, the industry has been going through a process of consolidation for about a decade.

As this deal demonstrates, reaching an agreement on business valuation is a key step in a successful acquisition. In large mergers and acquisitions, gaining approval of regulators is also absolutely critical. U.S. antitrust and trade regulation laws seek to prevent any business combination that will substantially reduce competition or lead to a monopoly in a market. In an international transaction like this one, the approval of regulators in other countries will also be a critical step in getting the deal closed.

Source:¬†Fort Wayne News-Sentinel, “World’s biggest beer makers agree to join forces,” Raf Casert and Pan Pylas, Oct. 13, 2015