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From Greg Wilson, chief analyst, the Legacy Portfolio: If completed, it’ll be one of the top five acquisitions of all time…
The world’s largest brewer—Anheuser-Busch InBev (NYSE: BUD)—announced its intention to acquire SABMiller (Nasdaq: SBMRF), the second largest. Its goal is to be the first truly global brewing company.
Africa is the world’s fastest-growing beer market. According to Bloomberg, about 65 million Africans are due to reach legal drinking age by 2023. SABMiller is the market leader in Africa.
SABMiller’s operations in Africa span 37 markets. It has 40 brands in Africa, and the continent accounts for roughly one-third of its profit and revenue. The merger would give AB InBev a foothold in the region.
Analysts estimate the combined company would have a 30% worldwide market share by revenues. It could have an even greater share of the profits. The Financial Times chart below estimates the combined entity could take 47% of global beer profits.
The deal will face several hurdles before it’s approved.
For one, SABMiller will need to divest some of its assets for the deal to get regulatory approval.
But if the deal goes through, the dominant global beer company would:
- Have leading market shares by sales in the U.S. (46%), Mexico (57%), Africa (33%), Brazil (63%), and the rest of Latin America (62%)
- Own six of the top 10 brands globally by sales
- Own eight of the top 10 brands globally by brand value
- Produce 150 billion fluid pints of beer annually.
Regular Daily readers know the new company is the exact type of business we want to own in the Legacy Portfolio:
It’ll dominate its global marketplace…
It sells a product people will always buy, in good times and in bad…
And it’ll use its overwhelming profits to reward shareholders through share buybacks and relentless dividend raises.
We’ll be watching the merger with great interest…
Reeves’ Note: Current Legacy Portfolio subscribers can access the October Legacy update, right here.