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AB InBev Officially Buys SABMiller to Create Beer Mega Giant

The new company will be the world's largest brewer.


Budweiser producer AB InBev has finally announced its acquisition ofSABMiller, reports the Associated Press, a merger of the two largest global brewers that results in a company set to produce one-third of the world's beer. As AB InBev continues to purchase distributors to squash craft beer competitors, its latest buy will create a beer giant that owns 29 percent of the global beer market, with Heineken in a distant second at 9 percent.

SABMiller initially rejected AB InBev's $104 billion offer, and the final price tag reached $107 billion. SABMiller will prevent its new partner, which owns Budweiser, from acquiring Bud rival Miller by selling its 58 percent stake to Molson Coors. The $12 billion deal will grant Molson Coors full control of the Miller brand and its operations.

While the new company is yet to be named, it has bigger issues that need to be resolved. One of the most prominent being the regulatory laws in China — where SABMiller currently owns a 49 percent stake in Chinese beer Snow — with a population that consumes one-quarter of the world's beer. The Chinese are known for being tough negotiators and have already warned that they will analyze how the merger will effect their economy. Erik Gordon of the Ross School of Business at the University of Michigan explains, "It's easier for businesspeople to reach agreements with each other than to reach agreements with regulators. Regulators get no reward for reaching an agreement, but get praised for being tough."

AB InBev is also looking forward to taking over SABMiller's businesses in Africa and Asia, as the rise of craft beers has slashed sales in developed markets such as the U.S. On this international level, AB InBev CEO Carlos Brito expects the merger to "create the first truly global brewer." Brito hopes the growth of the middle class in Africa will result in a similar potential for growth for the new company.