Anheuser-Busch InBev must sell SABMiller's Distell stake as completion edges closer

South Africa's Competition Commission has approved Anheuser-Busch InBev's takeover of SABMiller, provided the merged entity sells SAB's stake in Distell.

In recommending the merger to the country's Competition Tribunal, the commission attached several conditions to the acquisition. As well as the divestment of the 30% stake in Distell, AB InBev will be required to keep SAB's Coca-Cola bottling operations in South Africa separate from its Pepsi bottling footprint in other markets.

"Upon implementation of the merger," the Commission said today, "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."

The Commission also flagged competition issues, with Distell being the country's cider market leader, followed by SAB. "In order to address the above concerns, AB InBev will divest (i.e. sell off) the Distell shareholding within three years after closing date of the transaction," the Commission added.

On SAB's Coca-Cola operations, the Commission said: "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."

SAB is in the process of merging its Coca-Cola operations in South Africa with The Coca-Cola Co and Gutsche Family Investments, the majority shareholder in Coca-Cola Sabco.

In the recommendation, the Commission recognised AB InBev's raft of concessions it agreed with the South African Government last month. As part of the package, AB InBev pledged to ensure there will be no "involuntary job losses" in the country at any point in the future. The company will also maintain the current permanent employment levels in SA for five years after the purchase completes.

Competition Commissioner, Tembinkosi Bonakele said: "These conditions address issues that were raised by various stakeholders since the announcement of the acquisition of SABMiller by AB InBev, including the South African Government, which ultimately reached an agreement with the merging parties on its concerns, trade unions, market participants as well as the Commission's own investigation.

"We are confident that these comprehensive conditions address the competition and public interest concerns emanating from the merger."

AB InBev subsequently said: "The next and final stage of the merger consideration process in South Africa is for the Competition Tribunal to consider the proposed combination and make its clearance decision."

Today's announcement from the Commission follows last week's green light from the European Union for AB InBev's US$107bn purchase of SAB. AB InBev hopes to complete the transaction before the end of this year.

In South Africa, SAB owns a hop production company (SAB Hop Farms), a barley farming company (SAB Barley), a barley malting company (SAB Maltings) and holds a significant interest in Coleus Packaging, a tin metal crown producer. Tthrough its ABI Bottling subsidiary, the company is also an authorised Coca-Cola bottler.

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