Stamp once if you want to merge with MillerCoors, Clyde, and twice for no.


The Internet is alive this morning with speculation that Anheuser-Busch InBev, already the largest single beer supplier in the United States, may be on the hunt for new acquisition targets, and they may be stalking a big one. No Goose Island Brewing here – this time they are out to bag MillerCoors. That would create a company that controls something like 80 percent of the U.S. beer market.

Reuters writes:

“It’s more a question of when, not if,” said a banker who has worked on drinks deals. Others, also speaking on condition of anonymity, cited AB InBev’s record as a serial acquirer and the need for a target to match or surpass its US$52 billion purchase of Anheuser Busch in 2008.

International Venture Capital Post says a deal would be worth $100 billion and could be announced within a year, writing:

“Societe Generale beverage analyst Andrew Holland said, “If you do a deal, say, with ThaiBev, it’s not going to move the needle. If you do it with SAB it would give them another leg up.” ThaiBev is one of the largest beverage companies in Southeast Asia.”

Such a merger would create mind-boggling possibilities but also mind-boggling regulatory issues – it’s hard to imagine how the federal government or the European Union or any other entity with anti-trust kinds of issues on its mind would allow such a behemoth to exist. A merged Anheuser-Busch-InBev-Miller-Coors would be the dominant player in a world where already half the beer comes from just four companies (Heineken and Carlsberg would a distant second and third in post-merger world).

But that mind-bending dominance in the market is why our hometown business/brewer philosopher Tony Magee, founder of Lagunitas,  is calling B-S on these merger reports. Such talk has floated around before, he said, and never came to anything, and he can’t see it happening now.

“This is coming from analysts, not insiders,” he said. “It’s just analysts trying to sound like the smartest guys in the room … They’re just looking for something to talk about.”

Regulators would undoubtedly force the new company to spin off so many of its brands or shed so much of its production that it would hardly resemble the two companies we know now, he said.

But is this talk without basis? The companies didn’t speak for these reports, but the analysts say that the numbers speak for themselves: even after the recent acquisition of Mexico’s Groupo Modelo, AB InBev is close to a debt-to-earnings ration of just two, that magic threshhold where a company has plenty of cash, modest debts, and might be looking to do something with its spare change.

Even if the analysts turn out to be right and the merger comes, however, Tony says the craft industry doesn’t have too much to worry about, because the public has developed a solid taste for flavorful products.

“The people in the brewhouse at Anheuser-Busch are brewers, and they may love beer, but Anheuser-Busch is bankers,” he said. “And bankers are about numbers, not about flavor.”

– Sean Scully