AB InBev pledges R1bn SA fund to ease beer deal

Johannesburg - Anheuser-Busch InBev agreed to create a R1-billion ($69 million) fund that will support the South African beer industry and protect jobs in the country to help seal approval for its proposed $105-billion takeover of SABMiller.

AB InBev pledges R1bn SA fund to ease beer deal

Credit: EPA

The Anheuser-Busch InBev logo is seen at the company's headquarters in Leuven, Belgium. Picture: Julien Warnand, EPA

The deal struck between the Budweiser maker and the South African government includes a pledge to preserve its full-time employment levels in the country for five years after the deal closes and to not make any involuntary job cuts, Leuven, Belgium-based AB InBev said in a statement on Thursday. It also includes financial help for new farms to produce raw materials like hops and barley for the combined company.

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“This transaction is by far the largest yet to be considered by the competition authorities and it’s important that South Africans know that the takeover of a local iconic company will bring tangible benefits,” SA Economic Development Minister Ebrahim Patel said in the statement. “Jobs and inclusive growth are the central concerns in our economy.”

The pledge echoes one made by Wal-Mart Stores, the world’s biggest retailer, which agreed to set up a R200-million development fund when it acquired Massmart Holdings in 2011. South Africa is just one of the countries where AB InBev needs regulatory approval to combine the world’s two biggest brewers. The company has also agreed to retain a secondary listing on the Johannesburg Stock Exchange and locate its Africa office in the city.

‘Major step’

The agreement is “a major step forward in getting the proposed acquisition of SABMiller completed”, Eddy Hargreaves, an analyst at Canaccord Genuity, said by email.

South Africa’s Competition Commission asked for two extensions this month to a deadline to complete its investigation into the deal, without giving reasons for the delay. The country has a history of creating obstacles for foreign takeovers, taking 18 months to grant approval to Wal-Mart to buy Massmart. SABMiller’s deal to merge its African soft-drink bottling assets with those of Coca-Cola has yet to be completed, 17 months after it was announced.

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The antitrust agency now has until May 5 to complete its assessment of the beer deal’s impact on the South African market.

“If the Competition Commission concludes its investigation ahead of the current 5 May deadline, the prospects of getting the deal done by July rise significantly,” Mike Davies, founder of the political advisory company Kigoda Consulting, said by phone from Cape Town.

Other commitments from AB InBev include work to reduce the harmful use of alcohol and support for South Africa’s empowerment policies, which aim to redress inequality caused by apartheid.

London-based SABMiller, which started selling beer to gold miners in Johannesburg in 1895, controls 90 percent of South Africa’s market with brands like Castle Lager.

* With assistance from Thomas Buckley

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