For the past few months, the international media has been buzzing with the proposed merger of two global brewing giants, Anheuser-Busch InBev (ABI) and SABMiller (SAB). After SAB and its shareholders initially rejected several offers by ABI, it was announced Oct. 13 that the two companies reached a preliminary agreement for ABI to purchase SAB for over $100 billion. A formalized deal was announced for $107 billion Nov. 11. While the deal itself is largely focused on ABI's ability to combine its power with SAB in the emerging markets of Africa, Asia and Eastern Europe, how the deal impacts the beer market in the United States is of understandable concern for all market participants as well as the U.S. Department of Justice.

|

Combined Power

According to industry reports, if ABI and SAB were able to fully combine their existing operations in the United States, the newly formed entity would control approximately 70 percent of the U.S. market for beer. Given this figure it is highly likely that prior to finalizing the proposed acquisition and merger, ABI and SAB will need to negotiate terms with approval from the DOJ that would see some portion of the combined assets divested in the United States. For ABI in particular, the prospect of having to siphon off some portion of the proposed assets is not an unfamiliar hurdle to moving forward with its proposed takeover given that ABI's (and SAB's) corporate history over the past decade has been marked by similar mergers and acquisitions.

First, SABMiller was created in 2002 when SAB, a South Africa brewing company, acquired 100 percent of the Miller Brewing Co. Two years later, InBev, a Belgian company, was created in 2004 from the merger of Interbrew and AmBev, which at the time, represented the largest European and South American brewing companies, respectively. Then, in 2008, InBev entered into an agreement to acquire the Anheuser-Busch Cos. for $52 billion, resulting in the world's largest brewing company (ABI). Finally, in 2013, ABI entered into an agreement to merge with Grupo Modelo of Mexico.

In both 2008 and 2013, ABI's mergers came under scrutiny from the U.S. Department of Justice based on concerns that each newly combined entity would decrease competition and effectuate a monopoly of some or all of the U.S. beer market. As a result, the DOJ filed suit challenging both mergers pursuant to Section 7 of the Clayton Act, 15 U.S.C. Section 18. In both instances, in order to receive DOJ approval, ABI had to divest itself of certain beer brands. In 2008, ABI was required to divest itself of its Labatt Brewing assets (brands, recipes, trademarks, etc.) given monopolization concerns in the northern New York marketplace, specifically. In 2013, ABI had to divest itself of the Modelo portfolio in the United States—specifically its interest in Corona, Modelo and Pacifico—to achieve the DOJ's consent to the acquisition.