Bloomberg Business reported the Justice Dept. has made a second round of requests for documents from Anheuser-Busch InBev (NYSE:BUD) regarding its $106 billion merger with SABMiller (NASDAQOTH:SBMRY), a sign the deal may take longer than expected to complete.
While a second request for documentation in merger deals is not rare -- they occur in about 3% of all merger transactions -- their infrequency shows there are deep concerns about the transaction. In fiscal year 2014, of the 1,663 cases that could have received closer scrutiny, 51 second requests were made for more information.
These can be burdensome and expensive to comply with because the regulators are seeking information about the company's products or services, market conditions where the company does business, and the impact on competition as a result of the merger.
Anheuser-Busch told Bloomberg it wasn't surprised by the additional documentation request as it always knew the merger with Miller would get close scrutiny. If for no other reason than the size of the transaction, the megabrewer is correct. Of those 51 requests made in 2014, half of them were for deals that were larger than $1 billion, so the biggest beer deal ever that's going to bring the world's two biggest brewers under one roof would certainly have regulators going over it with a fine-tooth comb.
Yet even if it was expected, it's not without risk. When office supplies leader Staples (NASDAQ:SPLS) was hit with a second request for its proposed merger with Office Depot (NASDAQ:ODP), it signaled the deal was on the rocks with regulators and they ultimately opposed the transaction.
During 2014, the Justice Dept. challenged 16 mergers on the basis they would be bad for competition, seven of which it filed lawsuits to stop. Of the nine cases where it didn't file charges, it was because the companies gave up the merger proposal in four of them. In the other five, they restructured the deal.
That was the case when InBev was acquiring Anheuser-Busch. It got a second request for documents and ultimately agreed to the Justice Dept.'s demands it divest its Labatt brewery to allow the deal to be consummated.
A-B has already anticipated many of the objections regulators and others would have, which is why it peremptorily said Miller's joint venture with Molson Coors (NYSE:TAP) would be sold upon completion of the transaction. Analysts have estimated as much as $7 billion worth of brand assets may ultimately need to be divested.
The second request for documents in the Miller case may be a slightly higher hurdle for the brewer to get over, but it's not a death knell for Anheuser-Busch InBev's merger proposal.