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From Antitrust Law Daily, May 31, 2016

AB InBev, SABMiller deal gets nod from Canada, South Africa competition agencies

By Jeffrey May, J.D.

Anheuser-Busch Inbev SA/NV (AB InBev) and SABMiller plc (SABMiller) have moved another step closer to integration with actions taken today by the Canada Competition Bureau and the South Africa Competition Commission, conditionally approving the deal. The Canada Competition Bureau issued a No Action Letter (NAL), and the South Africa Competition Commission recommended that the country's Competition Tribunal approve the transaction, subject to conditions addressing competition and public interest concerns. SABMiller reports that the deal is on track to secure the necessary regulatory approvals to allow for closing in the second half of 2016.

The acquisition, valued at more than $100 billion, would combine the world’s largest brewers. AB InBev, the world’s largest beer brewer, is based in Belgium. Its major brands include Budweiser, Corona, and Stella Artois. Headquartered in London, SABMiller is the world’s second largest brewer and is known for its Miller and Peroni brands, among others.

The Canada Competition Bureau concluded that the proposed acquisition of SABMiller by AB InBev—the parent company of Canadian brewer Labatt—and the concurrent divestiture of certain SABMiller brands to Molson Coors Brewing Company were unlikely to result in a substantial lessening or prevention of competition in any relevant market in Canada. Labatt, which is owned by AB InBev affiliate Ambev S.A., and Molson are the two biggest brewers in Canada.

“Given SABMiller’s recent independent entry in Canada, the Bureau’s review focused on the effect of SABMiller’s entry on competition as well as whether SABMiller would have increased the level of competition in the relevant markets ‘but for’ the proposed transactions,” according to the agency. It was determined that the merger would not cause price increases that would meet the significance threshold set out in the country’s merger enforcement guidelines under any market definition, whether “all beer” or “beer based on price segments,” such as value, mainstream, or specialty beer.

Given the significant concentration in beer markets across Canada, the Competition Bureau also considered the impact of the proposed transactions on coordination. “While there were a number of characteristics of the beer industry that are conducive to coordination, such as transparent pricing, inelastic demand and multi-market exposure, the Bureau concluded that the acquisition of SABMiller was not likely to have a substantial effect on coordination in any relevant market,” it was noted.

In South Africa, consideration of the transaction will now move to the Competition Tribunal. The South Africa Competition Commission suggested that competition and public interest concerns would be resolved through a series of divestitures and other commitments.

SABMiller is the largest producer of beer products in South Africa. It also owns a hop production company, a barley farming company, a barley malting company, as well as other assets.

Among the commitments made by the merging parties to win approval is an agreement to divest SABMiller’s interest in Distell Group Limited, one of the largest producers of ciders in South Africa. To ensure that small beer producers, such as craft brewers, can compete effectively, AB InBev has agreed to ensure that retail outlets and taverns that the company supplies with beverage coolers or refrigerators are free to provide cooler space for these rivals. AB InBev also would be required to continue to supply input products, such as hops and malt that are currently supplied by SAB, to small beer producers, according to the Competition Commission. In addition, AB InBev has committed to make investments in South Africa and to protect South African jobs.

Worldwide review. The U.S. Department of Justice Antitrust Division’s review of the transaction continues. On May 5, Australia’s Competition and Consumer Commission announced that it would not oppose the proposed acquisition. Last week, the European Commission cleared the deal, conditioning approval on AB InBev selling essentially the entire SABMiller beer business in Europe.

Companies: Anheuser-Busch InBev, SA/NV; SABMiller plc

MainStory: TopStory AcquisitionsMergers Antitrust

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