There have been many rumblings lately about a big beer merger between two beer sin stocks, Anheuser-Busch InBev (BUD) and SABMiller plc (SAB).
Here at Sin Stocks Report, we’ve actually been keeping pretty quiet about it lately. Not that we haven’t been aware. However, we remember all too well the great big beer merger story that blew up the financial press last year (see the story we reported on it at Beer Sin Stocks Merger). At the time, we said it was inevitable and then it never happened.
Well, it finally appears to have happened… one year later.
As reported by BusinessInsider, AB InBev and SABMiller have agreed on a merger — one of the biggest corporate mergers in history. By October 13, both boards had reached an agreement in principle, so now it’s only a matter of time (potentially a lot of time) before it finally happens.
As BusinessInsider’s writer Oscar Williams-Grut reports, “The merger will create a $250 billion (£162.6 billion) beer giant that controls a third of the world’s beer supply and bring together iconic brands such as Stella Artois, Corona, Budweiser, Grolsch, and Pilsner Urquell.”
The motivation behind this purchase is simple: AB InBev’s North American marketshare is flat. People just aren’t drinking some of their iconic beers (Budweiser, specifically). So InBev will buy their next biggest competitor and lock up more than a third of the world’s beer market, and SABMiller is especially attractive because they’ve been growing in international markets.
Investors saw a nice spike in the value of their holdings after the announcement, but we shouldn’t be cracking open the bubbly just yet.
Although the deal was reached in principle, this isn’t going to be a simple marriage. It’s like two adults who are each entering into marriage later in life: both have to go through everything they own and decide whose toaster to keep and whose to give away. Same thing with InBev and SABMiller. The organizational merger might seem simple but the merger at the brand level is going to get way more complicated: Both of these companies have a MASSIVE list of beers and there’s no way that this merger is going to be a simple combination of all of those brands. Some brands will compete with other brands so they might just phase them out. And, governmental anti-competition and anti-monopoly oversight will step in, in whatever countries have those kinds of organizations, and may require that these organizations divest some of their brands to allow room for other competitors. In the long run, we may see the merged company enjoy a stronger stock price but it could get rocky in the short term as they figure out how to merge.
Also, financial writers are praying to whatever gods they worship that this company will NOT be called “AB InBev SABMiller”, which is very annoying to type and doesn’t sound very interesting at all.
And here’s another article (also from BusinessInsider) that reports how this merger could actually help craft brewers.