6 de octubre de 2015 / 14:31 / hace 2 años

CORRECTED-AB InBev seen reining in SABMiller's decentralised culture

(Corrects fifth paragraph to show SAB margin 29.5 pct, not 23 pct)

By Martinne Geller

LONDON, Oct 5 (Reuters) - If brewing giant Anheuser-Busch InBev buys SABMiller, it will likely force its centralised and standardised operating model on a business known for regional independence.

A culture clash is common in any merger. In this case, SAB’s integration into AB InBev may mean an end to the partnerships and equity stakes it has around the world. The combined company may also adopt a centralised structure that better suits a focus on global brands like AB InBev’s Budweiser and Corona, whereas SAB has historically nurtured local brews like Castle in South Africa and Aguila in Colombia.

Yet with AB InBev much more profitable than SAB or other brewers, investors are unlikely to mind.

“Investors recognise that two organisations have different cultures but at the end of the day, really they’re concerned about sustainable earnings growth,” said Bernstein Research analyst Trevor Stirling. “There’s not much sentimentality when it comes to these things.”

Bernstein estimates that cost savings from the deal could result in a 7.5 to 12.5 percentage point benefit to margins. AB InBev had a profit margin of 39.4 percent last year, versus 29.5 percent for SABMiller.

“The operating ethos at SAB was very decentralised,” according to a former SAB executive.

Managers under former CEO Graham Mackay were encouraged to use their own initiative and judgment, he said. Mackay, who led SAB’s international expansion with a string of deals over two decades, died in 2013.

Big brewers have been cutting costs recently as sales slow in many markets due to faltering economies and competition from craft beers and cocktails -- a trend which has led SAB to move toward consolidated procurement. But the company has tried to stay decentralised where possible.

“I think (AB InBev CEO) Carlos Brito will come in and rightly recognise the huge amount of additional cost that’s been layered into the business to try to protect that local culture,” said the executive, speaking on condition of anonymity.

“They’ll have no compunctions at all about throwing over this rather delicate operational culture for something that’s more financially driven.”

Brito runs Belgium-based AB InBev from New York with a legendary zeal for cost-cutting and performance analytics inherited from his mentors, the billionaire founders of private equity firm 3G Capital who are among the group of insiders who collectively own about 52 percent of the company.

“You’re always running, always close to a limit. You’re working very hard and being evaluated all the time,” 3G founder Jorge Paulo Lemann told Fortune Magazine in 2013 about the 3G culture. “People either like it or don’t like it.”

The two companies, which both declined to comment for this article, revealed last month that AB InBev had approached SAB about a combination. Under UK takeover rules, the company has until Oct. 14 to make a firm offer.

‘COMPLETELY OPPOSITE’

A combined AB InBev and SABMiller, dubbed “MegaBrew” by analysts, would make nearly one out of every three beers drunk globally. Its U.S. share would touch 70 percent, so any deal will likely lead to the disposal of SAB’s 58 percent stake in the U.S. joint venture it has with Molson Coors.

Many analysts also expect MegaBrew would unwind SAB’s 49 percent stake in its joint venture with China Resources , even if not required by a change of control clause or antitrust concerns.

The Chinese venture makes Snow, the world’s top-selling beer by volume, but the market is not very profitable, and having a large financial stake without control is “completely opposite” AB InBev’s typical approach, according to an industry banker.

“ABI want to run businesses they control, where they can really leverage their know-how,” the banker said, noting that such a structure is also better for shareholders. “If you’re an investor, you’re buying into the management team operationally.”

In Africa, SAB recently agreed to merge its soft drink bottling operations with those of Coca-Cola. Bernstein’s Stirling said he thinks MegaBrew will divest that business, but could keep in place SAB’s relationship with French wine maker Castel Group.

Castel, a pioneer of the African beer industry, owns 38 percent of SABMiller’s Africa business and SAB owns 20 percent of Castel. There has been recurrent speculation about SAB buying the rest, but Pierre Castel, the octogenarian founding president, has not wanted to sell, according to banking and industry sources.

The sources say the Castel relationship is important, however, because AB InBev has very little experience in Africa. They are less clear about the future of SABMiller’s 24-percent stake in Turkish brewer Anadolu Efes.

Analysts note that where previous deals by AB InBev have been mostly about consolidation and cost-savings, SAB is also about expansion.

“This deal comes with a growth element,” said Morningstar analyst Phil Gorham. “It’s about trying to offset the declines they’ve got in other parts of the world.”

Like SAB, AB InBev also has a large array of local brands it sells in particular markets, but much of its marketing focus and ambition is bringing its global brands like Budweiser to as many markets as possible.

“AB InBev does big global deals, which is probably smart because they have big global brands, and that’s how you leverage those brands,” said Harry Schuhmacher, publisher of Beer Business Daily. “Their ultimate goal is to have a Coca-Cola of the beer industry.” (Additional reporting by Anjali Athavaley and Lauren Hirsch in New York; Editing by Sonya Hepinstall)

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