Press release from the Competition Commission:
COMPETITION COMMISSION CONCLUDES ASSESSMENT OF AB INBEV/ SABMILLER MERGER
The Competition Commission (Commission) has recommended to the Competition Tribunal (Tribunal) that a large merger whereby Anheuser-Busch Inbev SA/NV (AB InBev) intends to acquire SABMiller plc (SABMiller) be approved with conditions. The Commission has found that the proposed merger raises several competition and public interest concerns, and has thus recommended conditions to the Tribunal to address these concerns.
AB InBev is a public company listed on the Euronext Brussels and New York Stock Exchanges. AB InBev is active in the production, marketing and distribution of beer, near beer and soft drink products. In South Africa, AB InBev only supplies beer products and its brands include Corona Extra, Stella Artois, Beck’s Blue and Budweiser which are imported and sold through DGB (Pty) Ltd (DGB), a global distributor of alcoholic beverages.
SABMiller is a public company with a primary listing on the London Stock Exchange and a secondary listing on the Johannesburg Stock Exchange (JSE). Through its subsidiaries, SABMiller is involved in the manufacture, distribution and sale of various types of alcoholic and non-alcoholic beverages. In South Africa, SABMiller is the largest producer of beer products and its main brands include Carling Black Label, Castle Larger, Hansa, Castle Light and Peroni. In addition to beer and non-alcoholic beverages, SABMiller, through South Africa Breweries (Pty) Ltd (SAB), owns a hop production company (SAB Hop Farms (Pty) Ltd), a barley farming company (SAB Barley (Pty) Ltd), a barley malting company (SAB Maltings (Pty) Ltd) and holds a significant interest in Coleus Packaging (Pty) Ltd, a tin metal crown producer. SAB, through its subsidiary ABI Bottling (Pty) Ltd, is an authorised Coca-Cola bottler.
Concerns arising from the merger and proposed conditions
The Distell Shareholding
The Commission found that SABMiller, through SAB, holds a significant shareholding in Distell Group Limited (Distell). Distell is the largest producer of ciders in South Africa, followed by SAB. Upon implementation of the merger, AB InBev will be entitled to appoint a certain number of directors to the board of Distell, its direct competitor. The Commission is of the view that this relationship creates a platform for the exchange of commercially sensitive information between AB InBev and Distell. Further, the ownership of an economic interest in a direct competitor is likely to dampen potential competition that could occur between AB InBev and Distell in relation to the production and supply of ciders in South Africa. In order to address the above concerns, AB InBev will divest (i.e. sell off) the Distell shareholding within 3 (three) years after closing date of the transaction.
Coca-Cola and Pepsi bottling arrangements
The Commission found that AB InBev bottles soft drinks for Pepsi in other jurisdictions and will post-merger also bottle soft drinks in South Africa for Coca-Cola. The Commission is concerned that these bottling arrangements for the two global leading soft drinks manufacturers could be a platform for coordination. In order to address this concern, AB InBev has undertaken to ensure that its employees who are involved in bottling operations for Coca-Cola will not also be involved in its bottling operations for Pepsi, and there will be no sharing of commercially sensitive information between the two.
Supply of tin metal crowns
The merged entity will continue to be the dominant supplier of tin metal crowns through the ownership of Coleus, the sole producer of tin metal crowns in South Africa. The Commission is concerned that the merger will increase the likelihood of the merged entity foreclosing its competitors by refusing them access to tin metal crowns. To remedy this concern, AB InBev has undertaken that it will supply tin metal crowns to third parties for a period of 5 (five) years after closing date of the transaction and that it will not enter into any exclusive agreements nor induce Coleus not to deal with or supply third parties.