Megabrew: American Antitrust Institute flags "serious competitive concerns" with AB InBev's takeover of SABMiller

 
Francesca Washtell
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Race-goers at Cheltenham drink pints of
AB InBev and SABMiller agreed a £71bn takeover last October (Source: Getty)

An American antitrust organisation has flagged "serious competitive concerns" with the AB InBev takeover of British drinks giant SABMiller.

"An AB InBev-SABMiller combination raises serious competitive concerns in the US beer market," Diana Moss, president of the American Antitrust Institute (AAI) said in a letter to the US Department of Justice.

The proposed merger, which was agreed last October in a £71bn deal, would "incent AB InBev to exercise market power both unilaterally and in coordination with rivals", the AAI said.

"Such effects would likely stifle important competition from smaller market participants such as craft brewers, raise beer prices, reduce quality and choice, and jeopardize innovation in this important sector.

"Indeed, the timing of the proposed merger highlights the rapid growth of innovative, diverse, high quality craft beers. Outside the brewpub or the microbrewery, craft beer makers depend on independent distribution to get products onto retail shelves and into the hands of the consumer," the institute added.

The letter, which is purely advisory, said the starting point for the justice department will be to analyse the competitive effects of the deal, and did not take a position on whether the merger should be blocked. It urged the department to prevent the companies from further consolidation of brewing or distribution capacity.

Megabrew deal

It is unclear how much weight the letter will have, but AB InBev can ill-afford a hold-up in the US to see its "megabrew" deal with SABMiller go through.

In South Africa, the brewer has faced obstacles related to a black economic empowerment scheme, despite AB InBev's announcement of a "groundbreaking" deal with the South African government in mid-April.

In an attempt to woo South African regulators and push through the SABMiller takeover, the brewer agreed to ensure jobs for five years and pay R1bn (£48m) in a package of commitments that included support to small-holder farmers, local enterprise development and manufacturing, as well as investments in green and water-saving technologies.

Last week, in a bid to assuage concerns of European antitrust regulators AB InBev agreed a $2.55bn bid from Japan's Asahi to buy the Peroni, Grolsch and Meantime brands.

In another previous attempt to pace 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.

AB InBev could not be reached for comment.

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