Biggest Czech brewers eyeing outcome of proposed mega deal

17-09-2015

A proposed mega-deal between the world’s first and second biggest brewers will be closely followed in the Czech Republic with premier export brewer Plzeňský Prazdroj directly concerned and the longer term fate of Budějovický Budvar also probably in play.

Photo: archive of Plzeňský PrazdrojPhoto: archive of Plzeňský Prazdroj The prospect of one of the biggest Czech brewers falling into the hands of a multinational partly dominated by US beer maker Anheuser-Busch has just got a lot nearer. The twist this time is that we’re not talking about state-owned Budějovický Budvar, which has long battled the US brewer in courts worldwide over the rights to use the Budvar name, but Plzeňský Prazdroj.

Plzeň’s world renowned brewery currently belongs to the Anglo-South African multinational SABMiller. But Anheuser-Busch InBev, a US-Belgian marriage which formed the world’s biggest brewer, has announced that it would like to table an offer for SABMiller. Far from brushing off the approach, SABMiller says that it prepared to examine any proposals that would improve efficiency and the company’s performance.

The approach from the Belgo-US brewing giant for this mega takeover is based on its ambitions to boost its market share in Africa and the fast expanding markets of Africa. SABMiller has a strong hand in all these regions with is relatively weak in Latin America, where Anheuser-Busch InBev is a dominant force. If it went through, the resulting company would produce a third of the beer drunk worldwide.

And at the moment, it’s a very big if. In spite of the probable worldwide synergies, problems with the regulatory competition authorities can be expected. The US situation looks particularly tricky with Anheuser-Busch InBev already commanding around half the market and SABMiller having around a third of beer sales. But the vigilant European Commission authority is likely also likely to baulk at the creation of such a formidable global brewing force.

In the Czech Republic, hangovers from such a deal are unlikely to present themselves in such a way that the local competition authority would be provoked to intervene. Plzeňský Prazdroj is one of the big three, perhaps four, Czech brewers but Anheuser-Busch InBev has a minimal following among local beer drinkers. Down the line though, a deal between SABMiller and Anheuser-Busch InBev might mean that that long rumoured takeover of Budějovický Budvar would become much more problematic given that two of the biggest Czech brewers would come under the same owner.

But it could well be that the existing regulatory obstacles in the US and Europe that might scuttle the mooted mega-deal well before such a scenario. The price demanded by competition authorities in terms of mandatory sell-offs of assets might be so great that the benefits from the deal would simply dissolve. SABMiller should give its response to the approach by mid-October and it’s more than likely that all the big players in Czech brewing will be keeping a keen eye on how things play out.

17-09-2015