The biggest brewing merger in history is plowing ahead, albeit at a cost.
China Resources Beer has agreed to buy SABMiller Plc's (sbmry) stake in their CR Snow venture for a less-than-expected $1.6 billion, removing another regulatory obstacle to its $105 billion takeover by Anheuser-Busch InBev (bud).
That's less than half what some analysts thought ownership of the world's single biggest-selling beer was worth. Jeremy Yeo, an analyst at Mizuho Securities Asia, said he had been expecting a price tag of $3 billion to $3.5 billion.
Investors in China Resources Beer (Holdings) Co. Ltd. celebrated its bargain buy by pushing shares in the Chinese state-backed company 25 percent higher to a five-year high.
Wednesday's deal was widely anticipated but came sooner than expected for some. It's the latest in a series of divestments aimed at getting placating antitrust regulators around the world about the merger of two companies that account for almost one in every three beers sold globally.
AB InBev has already struck deals to sell SABMiller's stake in U.S. joint venture MillerCoors to Molson Coors Brewing (tap.a) and its Peroni and Grolsch brands to Japan's Asahi Group Holdings (asbry).
"We think that the 49 percent stake could have attracted a higher price if offered to other brewers on the open market, but assume that ABI's negotiations with the Chinese regulators...ended up precluding this course of action," said Canaccord Genuity analysts, who had valued the stake at around $5 billion.
The deal, which would give China Resources full control of the largest brewer in China with a 30 percent market share, is contingent on the closing of the AB InBev-SABMiller deal, which is expected later this year.
China Resources plans to use a combination of funding options including debt and/or equity financing to pay cash.
China Resources accounted for 23.3 percent of the beer market in China in 2014, with Tsingtao Brewery second at 18.4 percent, according to Euromonitor International.