This Side Deal Could Clear the Way for InBev and SABMiller to Merge

November 10, 2015, 8:04 PM UTC
SABMiller USA 2013Credit: Tom Parker/OneRedEyeImage is copyrighted
SABMiller USA 2013 Credit: Tom Parker/OneRedEye Image is copyrighted
Photograph by Tom Parker — OneRedEye

Molson Coors is reportedly close to paying about $12 billion for the stake of the MillerCoors joint venture it doesn’t already own, a side transaction that could pave the way for the world’s two biggest brewers—Anheuser-Busch InBev and SABMiller—to announce an official merger.

The Wall Street Journal is reporting that the deal will be announced Wednesday, according to people familiar with the matter, along with a formal pact between SABMiller and InBev (BUD).

As Fortune has previously reported, before the $100 billion-plus merger between InBev and SABMiller could become a reality, the MillerCoors joint venture that is partly owned by SABMiller would need to be sold off to a rival, otherwise the U.S. Justice Department would never sign off on a beer merger that would result in the top brewer selling seven out of 10 beers in the U.S.

When reports of an InBev-SABMiller deal first surfaced, U.S. beer experts were quick to point out that from an antitrust perspective, the deal was a no-starter for the domestic market. But with the sale of the MillerCoors joint venture stake, it appears that InBev has found a solution. Molson Coors (TAP), always the most likely acquirer, has controlled the joint venture with SABMiller since it was formed in 2008. Voting interests for the venture were evenly split, while the share in profits was 58% for SABMiller and 42% for Molson Coors.

A Molson Coors spokesman would not comment on the Journal report.

Last week, InBev and SABMiller were granted another extension by the U.K.’s panel on takeovers and mergers to give the brewers more time to finalize the terms of their acquisition. Beer observers have speculated that InBev wanted a deal cemented for the MillerCoors stake before finalizing plans for the SABMiller takeover bid. The latest extension gave the companies a deadline of 5 p.m. London time on Wednesday, Nov. 11— so the timeline that the Journal outlined would be ideal for InBev.

If the deal were to occur, it would give Molson Coors full control of the company’s U.S. operations at a time when many of the MillerCoors legacy brands are facing pressure from fast-growing craft brands, as well as market share losses to the wine and spirits categories. For the first nine months of the year, MillerCoors’ net sales slipped to $5.98 billion from $6.07 billion a year earlier. Encouragingly, Coors Light and Miller Lite have been gaining market share in the domestic premium lights category—though volume for that segment of the beer business has generally been sliding as Mexican exports and craft beers perform well.

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