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Bankers cash in on megabrew merger

Added: Sunday, August 28th 2016

AB merger

Only the lawyers get rich: as full details of the AB InBev merger with arch-rival SABMiller are published, it’s revealed that fees paid to lawyers and investment bankers total $1.5 billion – at the same time as 5,500 jobs will be axed. These include 51 staff at SABMiller’s London head office and 570 at its site in Woking, Surrey.

The merger – the biggest in UK corporate history and the third biggest in global terms – will cost AB InBev £79 billion. The world’s biggest brewer is best known for American Budweiser, Brahma in Brazil and Belgium’s Stella Artois and is the result of a previous merger between AmBev of Brazil, Anheuser-Busch of the U.S. and InBev of Belgium.

SABMiller, a British-registered company, was created by a merger between South African Breweries and Miller of the U.S. As well as Miller Lite and leading South African brands, it also owns Grolsch in the Netherlands, Peroni in Italy and Pilsner Urquell, the iconic Czech golden lager. But all three brands will have to be divested by the new global behemoth – dubbed Megabrew -- to meet the demands of regulators in the U.S. and EU.

In 2015, SABMiller bought the much-admired Meantime craft brewery in Greenwich, South-east London. Ownership passed to AB InBev but the group has now sold Meantime on to Asahi of Japan. But AB will maintain a presence in the fast-growing London beer market through its ownership of the Camden Town Brewery, which it bought for £80 million.

The group has a reputation for aggressive cost cutting to undermine rivals, and is expected to cut around 3 per cent of the combined workforce world-wide. AB InBev, which has 150,00 employees world-wide, plans to squeeze $1.4 billion in annual cost savings over the next four years and there could be further job cuts.

It is able to reduce production costs through its ability to buy raw materials, such as grain and hops, in massive bulk and at considerable discounts. The result is cheap beer that drives rivals’ products off shelves and out of bars.

While workers will lose their jobs, bankers and lawyers will enjoy a bonanza. Bankers including JP Morgan, Barclays, Goldman Sachs and Lazard, along with lawyers from Linklaters and Freshfield Bruckhaus Deringer, will pop the champagne – in preference to Miller Lite – as they run up fees totalling $1.94 billion as a result of advising and handling the merger.

The final plans for the merger will be voted on by shareholders of both AB InBev and SABMiller on 28 September. It is not yet known who will buy Grolsch, Peroni and Pilsner Urquell though the Czech government may take a close interest in the fate of the “Original Pilsner”.