Instant Analysis: European Regulator Conditionally Approves AB InBev/SABMiller Merger

The monster beer deal gets a big green light from across the Atlantic.

Eric Volkman
Eric Volkman
May 26, 2016 at 9:27AM
Consumer Goods

What happened?

Pour a tall frosty one, and clink glasses with Anheuser-Busch InBev (NYSE:BUD) and SABMiller. The two big global beer companies received approval to merge from the European Union's competition regulator, the European Commission.

The approval is conditional, however, upon the sale of much of SABMiller's European beer portfolio. That shouldn't be difficult, as Anheuser-Busch InBev has already reached a deal (with Japan's Asahi) to sell SABMiller's French, Italian, Dutch, and U.K. brands. Additionally, it has pledged to divest  SABMiller's beers in Central/Eastern European countries the Czech Republic, Slovakia, Hungary, Poland, and Romania.

Does it matter?

Anheuser-Busch InBev's willingness to unload valuable brands -- which include familiar names to beer fans such as the Czech Republic's Pilsner Urquell, and Holland's Grolsch -- smoothed the way to the EU's approval of the roughly $107 billion merger. That's not a particularly easy green light to obtain, given that the commission can be stricter than regulators in other parts of the world.

Now that the deal has surmounted the EU hurdle, antitrust authorities in key markets such as the U.S. and China must sign off on it. But these countries have less severe regulatory regimes.

Additionally, as it did in Europe Anheuser-Busch has made arrangements for divestments in order to assuage antitrust concerns. In this country, it's reached a deal with Molson Coors (NYSE:TAP) to cash out of SABMiller's stake in the MillerCoors joint venture. Molson Coors would thus graduate from its current minority position in MillerCoors to full ownership. After that, Molson Coors would become the No. 2 American brewer, behind Anheuser-Busch InBev.

Although the news of the EU's approval is hardly unexpected, it should be taken very positively by Anheuser-Busch shareholders. It heralds similar approvals elsewhere around the globe, not to mention a powerful new company that will be a force to be reckoned with.