BUD Anheuser Busch Inbev SA NV

By Tripp Mickle and Laurence Norman 

Anheuser-Busch InBev NV on Friday said its beer megamerger with SABMiller PLC could lead to thousands of job losses in coming years, according to disclosures related to the transaction.

Based on integration planning, the Belgian-based brewer expects to cut at least 5,500 jobs after the merger. An AB InBev spokeswoman said that number could change as the integration of the two businesses proceeds.

AB InBev said the "job reductions will be implemented gradually, in phases, over a three-year period" and would equate to about 3% of the workforce of the combined companies. The estimate at this point doesn't include possible reductions in sales and front-office supply staff; the company said "regulatory restrictions" prevent it from evaluating those functions during integration planning.

AB InBev currently employs about 150,000 people, while SABMiller puts its workforce at roughly 70,000. However, SABMiller is due to shed most of its European assets under the deal.

The cuts will contribute to AB InBev's expected $1.4 billion in annual cost savings by the end of the fourth year after the transaction. Additional savings will come from raw-material procurement and other improvements.

The documents disclosed to shareholders show AB InBev and SABMiller combined will spend nearly $2 billion on closing costs and fees related to the transaction, amounting to a big payday for bankers, lawyers and consultants.

AB InBev will spend almost $1.74 billion, including $725 million in financing arrangements; $475 million in transaction taxes and other costs; $135 million for financial advice to Lazard Ltd. and others; $185 million on legal advice; $180 million on management consultants and other services; $20 million on public-relations advice; and $15 million on accounting advice.

SABMiller will spend $202 million in closing fees, including $113 million on financial advice to Robey Warshaw LLP and others; $76 million on legal advice; $9 million on public-relations advice; and $4 million on accounting advice and other costs.

AB InBev and SABMiller expect to close the $100 billion-plus merger on Oct. 10. The transaction would create a global beer giant with more than 400 brands and a roughly 26.8% share of the world's beer market, according to industry tracker Plato Logic.

Friday's filings also disclose for the first time that AB InBev approached some SAB Miller board members about a combination much earlier than previously thought -- about 10 months before news of it broke. In December 2014, one of the Belgian brewer's major shareholders -- who wasn't identified -- approached representatives of the Santo Domingo family, which owns roughly 14% of SABMiller, about a merger. An AB InBev representative later broached the possibility with Altria Group Inc., the tobacco company that has an approximately 27% stake in SABMiller.

After months of talks, AB InBev shared a nonbinding term sheet with Altria and the Santo Domingos in August 2015, setting in motion a deal that would combine the world's two largest brewers. They announced their agreement on Nov. 11, 2015.

Acquiring SABMiller would give AB InBev access to the fast-growing African beer market and reduce its reliance on the U.S. AB InBev said Africa is expected to represent 8.1% of global beer volumes by 2025, up from 6.5% in 2014. Beer volumes on the continent are expected to grow three times faster than global industry volumes, according to the documents. The deal also gives AB InBev new territory to expand sales of its global beer brands Budweiser, Corona and Stella Artois.

AB InBev has set a target of raising revenue to $100 billion by as early as 2020. The brewers stated combined annual revenue of $55.46 billion in the documents released Friday.

The documents said the combined company's business model will focus on "organic revenue growth ahead of the industry, coupled with tight management costs." Key to that will be AB InBev strategies such as "zero-based budgeting," a system that requires managers to plan each year's budget as if no money existed the previous year. It forces them to justify costs and has helped foster AB InBev's reputation as a cost-cutter.

Write to Tripp Mickle at Tripp.Mickle@wsj.com and Laurence Norman at laurence.norman@wsj.com

(END) Dow Jones Newswires

August 27, 2016 02:48 ET (06:48 GMT)

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