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Delay threatens AB InBev’s merger with SABMiller

Anheuser-Busch InBev’s hopes of completing its £71 billion takeover of SABMiller in the second half of this year are under threat amid suggestions that securing South African regulatory approval could take at least 18 months.

The merger of the world’s two biggest brewers would not create competition issues in South Africa.

However, a leading analyst said yesterday that the country’s regulatory bodies may delay approval pending agreement on issues including employment, social and economic welfare and black empowerment. Trevor Stirling, at Bernstein, said that while attention had focused on the resolution of increased market concentration in America, Europe and China, South Africa “may be the slowest process, likely taking a minimum of 12 months and potentially up to 18 months or longer before final clearance”.

Industry sources said there was a risk that SABMiller could lose key personnel to rivals, while the Peroni maker’s performance could start to suffer. “A lot can happen in 18 months,” one said.

Mr Stirling said that the wider public interest mandate of South Africa’s three-tier regulatory authority — the competition commission, the competition tribunal and the competition appeal court — could force AB InBev to give assurances on small and medium-sized suppliers and the spread of ownership.

Mr Stirling cited Walmart’s entry into the South African market through the purchase of a controlling stake in Massmart as an example of how the regulatory process can become stalled.

Having announced an offer to buy 51 per cent of Massmart in September 2010, Walmart secured shareholder approval in January. The competition commission recommended the deal be approved without conditions, but, after opposition from the government and unions, the competition tribunal imposed conditions relating to redundancies, labour agreements and suppliers.

In March 2012, 18 months after the deal was agreed, the competition appeal court ruled in favour of the deal but imposed tightened conditions, including the reinstatement of 500 workers laid off before the transaction.

Some experts have suggested that SABMiller’s influence in South Africa, where the company was founded in 1895, might help to smooth the takeover deal’s progress, but the company’s recent experiences would suggest otherwise. In November 2014,

SABMiller agreed to merge its Coca-Cola bottling operations in South Africa with those of the Coca-Cola Company and another Coke franchisee in the region. The deal has yet to be approved and the date for the competition tribunal is tipped to be in May, 18 months after the three-way tie-up was announced.

Mr Stirling said: “The process is likely to be very political and could take up to 18 months, possibly even longer if it is appealed. Furthermore, there almost certainly will be conditions attached.”

Source: - 28 January 2016