AB InBev Might Pay South Africa USD 13 Million To Seal SAB Miller Merger

AB InBev Might Pay South Africa USD 13 Million To Seal SAB Miller Merger

After SAB Miller [LON: SAB] and Anheuser Busch Inbev SA, AB InBev [EBR: ABI], announced their landmark merger agreements, the next hurdle for the two beer giants to cross are regulatory approvals of the biggest merger ever.

Late last year, AB InBev agreed to pay $106 billion for SAB Miller. While the company claims it would complete regulatory screenings in Europe later this year, the company is meeting a rather stringent process in South Africa. The South African Competition Commission just asked for another extension of its probe into the merger process of the two companies.

While AB InBev has easily caved in to their demands, the requirements that would be laid out for the company to finally takeover its South African counterpart, might increase the cost of the coveted merger. As reported, Ebrahim Patel, the country’s Economic Development Minister has signified his willingness to be fully involved in the probe and negotiation process.

Ebrahim Patel, South Africa’ s Economic Development Minister. Source: transafricaradio.net

Analysts are already forecasting likely demands that he might put forward before the merger will get the government’s rubber-stamp. In 2013, Ebrahim made Walmart Stores Inc. [NYSE: WMT] cough out millions of dollars as a contribution to a development fund. As far as AB InBev plus SAB Miller’s merger is concerned, Bloomberg quoted a journalist with the knowledge of the matter that the minster is demanding for about USD 13 million for development fund before giving his approval on the merger.

SAB Miller currently controls 90% of the South African beer market. The company is valued at USD 99 billion, with a strong presence in non-alcoholic and soda drinks in South Africa, making it corporate darling authorities would not easily let go.

In 2010, SAB Miller invested in Nigeria’s PABOD breweries in Port Harcourt, South South Nigeria and International Breweries in Ile-Ife, South West of Nigeria. As a majority shareholder in Intafact Beverages Limited, the registered company in Nigeria, AB InBev should be taking over the company as soon as the deal is signed off in South Africa.

Interfact’s biggest rivals Guinness Nigeria PLC [GUINNESS:NL] and Nigeria Breweries PLC [NB:NL] trading as Heineken International, are currently pressured by slumping growth in beer market due to a lull in the local economy due to falling crude oil prices. The increasingly competitive climate in the alcoholic beverages market, would mix up to confront a prospectively-bullish AB InBev.

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