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What lies ahead for ‘Megabrew'?

by , 14 October 2015

Yesterday saw the board at SABMiller finally happy with an offer from Belgium brewer Anheuser Busch InBev.

If it goes through, further to the necessary regulatory approval, the deal will be the biggest to happen in the UK.

So what could stand in the way of the deal to form this ‘Megabrew'? And will shareholders be happy further down the line?

Let's take a closer look…

Many hurdles stand in the way of the SABMiller/AB InBev deal

Before SABMiller [JSE:SAB] shareholders can start working out how much richer the impending deal with AB InBev could make them, the deal needs to be given the green light.

To begin with, ‘Megabrew,’ as the resulting company is being named, has to get past the South African government.

Peter Montalto, senior emerging markets economist and strategist at Nomura, points out, we shouldn’t “underestimate the ability of the SA government to ‘fiddle’ in the deal,” reports Fin24. Mr Montalto believes the Competition Commission could make things more difficult for the deal to go through.

But it’s not just in SA that regulatory approval may be difficult to attain, it “could be a protracted and difficult process globally” too, says BDLive. If the deal is a success, it will be the “third biggest corporate takeover deal” in the world.

There are also worries from smaller, more specialist beer makers who fear AB InBev has the ability to squeeze them out of the market, notes the BBC.

SABMiller’s share price reflects the potential problems that lie ahead

The share price of SABMiller appears to be reflecting concerns about success of the deal reports BDLive. Yesterday shares were trading 10% lower than the “price AB InBev agreed to pay… a bigger discount than often seen in takeovers”.

This is down to the deal facing “months of scrutiny by antitrust regulators around the world that may yet derail the transaction,” adds BDLive.

And then there’s the prospect for shareholders…

Some of the largest deals that go through don’t always result in the best outcome for shareholders, point out Bloomberg. In acquisitions valued at more than $50 billion, “parent companies’ shares declined by a median of 12%, according to a sample of data from 22 transactions”.

So if the deal does go ahead, it’s going to take a lengthy period of time to gain all necessary approval. And the result may not be a good as shareholders are hoping for.

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What lies ahead for ‘Megabrew'?
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