By Andy Young

It is not surprising to see reaction from the industry and across the markets following confirmation that AB InBev has approached SABMiller about a possible takeover.

SABMiller took the unusual step of responding to media speculation about AB InBev's approach and since then many across the industry have reacted to the news.

Spiros Malandrakis, senior alcoholic drinks analyst at Euromonitor International, said: "Beyond the financial and cost savings side of such a potential deal, there is little doubt that macro-beer is now gazing at the event horizon of the merger and acquisition era. 

“As the craft movement is coming of age and solidifies its position as a key disruption force within beer and the entire alcohol industry, corporate consolidation can perhaps provide some last drops of stock market intoxication but will remain largely irrelevant to the scores of millenials seeking alternatives to big beer’s offerings. Innovation and small scale experimentation will decide future growth trajectories if not respective size and margins.” 

Paul Gatza, director of the Brewers' Association in the US highlighted that it could mean major changes to beer brand ownership in that country, with other brewers circling to pick up some of the SABMiller brands.

He said: "I anticipate many interested parties will engage to help The Department of Justice (DOJ) evaluate concentration of market concerns. Regulators would be expected to require that the Miller component in the US not be included in the deal for concentration of market concerns.  

"DOJ didn’t allow the U.S. absorption of Modelo without a sell-off (to Constellation Brands-Beer Divsion), so it is hard to think that they would allow absorption of Miller.  

"That means that Miller brands in the US could be sold off to MolsonCoors or other large international entities inside or outside of the current beer universe. Constellation Brands' Beer Division, Heineken or Carlsberg could all have some interest. 

"There may be large money interests looking to get into the beer space as well, as beer at that scale generates significant cash flow and profitability."

As well as having to sell-off certain brands in the US, some experts are speculating that a takeover would see the sale of SABMiller's stake in its CRSnow joint venture with China Resources Enterprise Ltd. CRSnow is behind Snow Beer, the largest selling beer brand in the world.

A spokesman for China Resources Enterprise told the Wall Street Journal that he was "unable to confirm anything due to a confidentiality agreement between ourselves and SABMiller".

There is no speculation that any of SABMiller's Australian brands would have to be sold should the takeover go ahead.

Market reaction to the news was as predictable as it was swift, with SABMiller's UK share price rocketing from 3097p to 3621.50p within 15 minutes of the company's statement.

Speculation regarding the takeover started earlier this year when AB InBev spoke to banks about possible takeover targets. Also 3G Capital Partners, which owns a major stake in AB InBev, raised about $5 billion from investors for a new takeover fund.

If the takeover does go ahead it would initially see around 30 per cent of the world's beer production controlled by one company, although this is before any necessary brand sell-offs.

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The Shout Team

The leading online news service for Australia's beer, wine, spirits and hospitality industries.

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