SAB/Heineken could leap antitrust hurdles

2014-10-11

By Robert Cole

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

A $130 billion Anglo-Dutch beer monster could leap antitrust hurdles. Heineken has rebuffed a takeover approach from SABMiller as “non-actionable.” As you might expect from a combination of the world’s second- and third-biggest brewers, there are major competition concerns. But these could be fixed and the result would be an emerging markets titan. The rejection suggests family control of Heineken is the real sticking point.

To be sure, the protagonists would have to swallow a couple of flagon-sized problems. Numbers from Datamonitor Consumer, the market researcher, show that SAB-Heineken would pour 51.9 percent of the beers in Italy, 68.7 percent in the Netherlands and 72.8 percent in Poland. Both are big in Africa. Meanwhile, Heineken’s shareholding in India’s United Breweries would create a headache on the subcontinent and SAB’s stake in Efes might give a merged entity more strength in Russia than regulators could stomach.

All this adds complexity. But it need not be a deal-breaker. For example, the duo could create a single bundle of European assets, such as Grolsch and Moretti, and sell them on. Asian brewers such as Kirin or Asahi might be keen.

And the fact SABMiller bothered asking the question suggests it already has an answer, and that it sees big benefits in a deal. These would include hefty synergies, and a strong global profile. Consumers in the growing middle classes of Asia, Africa, and Latin America are thirsty and SABMiller and Heineken are chasing these opportunities independently. They might do better as one.

So the attitude of the Heineken family looks like the biggest issue. Although its economic interest in the brewer is below 23 percent, it effectively controls just over 50 percent of the votes. And as the statement on Sept. 14 makes clear, the Heineken family cherishes its independence.

SABMiller’s task is to show that merger gains, less whatever concessions are needed to assuage competition watchdogs, will create more value than will ever come to an independent Heineken. In that case Heineken’s other owners could be expected to push the family to reconsider.