Megabrew latest: AB InBev woos South Africa with wide-ranging job and investment commitments in bid to push through SABMiller takeover

Francesca Washtell
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AB InBev owns Stella Artois among a range of other major beer brands (Source: Getty)

Anheuser-Busch InBev has agreed a "groundbreaking" deal ensuring jobs and wide-ranging funding to woo the South African government and push through its megabrew deal.

AB InBev, the world's largest brewer, has committed to maintaining its total permanent employment levels in South Africa for a period of five years at the date of closing its takeover of fellow drinks giant SABMiller, and has also pledged that no jobs in the country will be lost as a result of the merger.

The package of commitments also ensures the localisation of production and inputs used in the production of beers and ciders, as well as long-term commitments to South Africa and participation of small beer brewers in the local market.

The company has agreed to invest R1bn (£48m) to support small-holder farmers, as well as to promote enterprise development, local manufacturing, exports and jobs, the reduction of the harmful use of alcohol by providing low and no-alcohol beverages for consumers, and investing in green and water-saving technologies.

As part of the R1bn commitment, AB InBev will finance 800 new emerging farmers and 20 new commercial farmers to produce barley, hops, maize and malt for the company, with the strategic intent to create additional jobs in the agricultural supply chain.

The company committed to expand the production of barley to be malted and to turn a current net import of barley to a net export of malt (the processed form of grain used in beer brewing).

Regulatory roadblocks from South Africa

Gaining the approval of South African regulators has proven one of the biggest roadblocks for AB InBev's £71bn takeover deal of SABMiller, which was agreed last October and will be the largest ever British corporate merger.

It is attempting to retain its listing on the Johannesburg Stock Exchange, but has faced complications from the country's economic development minister, Ebrahim Patel, filing a notice with South Africa's Competition Commission that stated he wished to take part in proceedings. Patel also demanded a large plan for development funding to help the deal pass, reported South Africa's Business Day newspaper.

On Wednesday, AB InBev granted the South African Competition Commission a 15-day extension to its investigation into the tie-up, after the regulator missed the probe's Tuesday deadline.

The antitrust agency will have until May 5 to make a final decision on the deal, while the megabrew merger is tipped to be completed by the end of the year.

Wooing everybody

This is the second announcement AB InBev has made this week to assuage the concerns of competition regulators.

The company informed European antitrust regulators on Tuesday it plans to sell the premium European Peroni, Grolsch and Meantime brands owned by SABMiller, while outside of Europe the company also said it sell SABMiller's stake in the US joint venture MillCoors to Molson Coors Brewing.

To try to pave the way for the megabrew deal, AB InBev embarked on a jumbo euro bond deal in mid-March, offering a six-tranche, euro-dominated deal with maturities ranging from four to 20 years in length at a minimum of $1bn each in size.

The Stella Artois maker also raised its dividend on the back of missed expectationsin its fourth quarter results, where revenues were up seven per cent.