U.S. okays AB InBev deal for SABMiller, adds craft beer protections

By Lauren Hirsch and Chris Prentice

NEW YORK (Reuters) - U.S. antitrust regulators approved on Wednesday a $107 billion (81 billion pounds) deal to combine the world's top two brewers, Anheuser-Busch InBev (ABI.BR) and SABMiller (SAB.L), after securing an agreement from the companies to unload U.S. beer assets and preserve competition from independent craft brewers.

Denver-based Molson Coors will buy SABMiller's 58 percent stake in their U.S. joint venture, MillerCoors, the companies said. They will divest the rights to all SABMiller beer brands currently imported or licensed for sale in the United States.

AB InBev has also agreed to curtail incentive programs that encourage beer distributors to sell more AB InBev beer than its rivals. Reuters previously reported that the DOJ was investigating AB InBev's practice of financially rewarding distributors based on overall percentage of AB InBev beer they sell.

AB InBev will also be required to secure the DOJ’s approval before acquiring any craft beer brands. A source familiar with the matter declined to elaborate on specific considerations such a review would take into account.

"The remedy we secured will help preserve and promote competition in the multi-billion dollar U.S. beer industry," Deputy Assistant Attorney General Sonia Pfaffenroth of the Justice Department's Antitrust Division said in a statement.

"Independent distributors that sell (AB InBev’s) beer will have the freedom to sell and promote the variety of beers that many Americans drink,” she said.

The terms of AB InBev's agreement with the DOJ expire in 10 years, a typical time span for such an agreement, the source said.

"While we will make some adjustments to certain aspects of our U.S. sales programs and policies, our fundamental approach and commitment to this market will not change," said Carlos Brito, AB Inbev's CEO, in a statement.

The deal marries AB InBev's Budweiser and Stella Artois beers with SABMiller's Miller and Pilsner Urquell. The companies brew almost a third of the world's beer, dwarfing other major producers like Heineken and Carlsberg.

The combination will give AB InBev more breweries in Latin America and Asia and an entrance to Africa, as major markets such as the United States weaken due to the popularity of rival craft brewers.

For the U.S. market "this doesn’t change a whole, at least not immediately," said Adam Fleck, equity analyst with Morningstar in Chicago. "There's a chance to increase the profitability for Molson Coors and MillerCoors enterprises that will make MillerCoors more competitive."

Longer-term, Fleck said, a consolidated MillerCoors could itself become a more potent rival to independent craft brewers, particularly in negotiating distribution deals.

Australia, Europe and South Africa have cleared the deal. The companies are waiting for China to approve it although a proposed sale of SABMiller's stake in CR Snow was expected to lead to clearance.

AB InBev reaffirmed its plan to close the deal by the end of the year. Shares of the company rose earlier after the DOJ announcement but were down less than 1 percent at $112.95 in late trade in New York. SABMiller closed up less than 1 percent in London.

(Reporting by Lauren Hirsch and Chris Prentice; Editing by Michele Gershberg, Bernard Orr)