March 21, 2019

Breakingviews: AB InBev shareholders get more smoke, less 3G

by Breakingviews.

In the heyday of America’s beer wars, Budweiser rival Miller advertised its lower-calorie Lite as “Great taste, less filling”. A variation applies to board changes announced by Bud’s current owner, Anheuser-Busch InBev: “More smoke, less 3G.” Whether shareholders, the intended consumers of this new governance product, will swallow it with glee the way beer drinkers did Miller Lite is less clear.

The $143 billion company, clearly attuned to brewing dissent among its owners, named Martin Barrington, the former head of tobacco group Altria, as its new chairman, replacing Olivier Goudet. The latter’s departure made sense because his role at JAB, a serial acquirer of food and soft-drinks makers, looked like a conflict of interest as AB InBev pushed into alcohol-free beverages.

At the same time, two directors associated with 3G Capital, the Brazilian private equity firm whose partners own meaningful stakes in AB InBev, are stepping down (though one is being replaced by his daughter).

The result should be a board that is less representative of the financial engineering that created AB InBev and is better equipped to handle its new challenges. AB InBev is a highly indebted purveyor of mostly mainstream beer in an era where consumers are gravitating towards more premium, craftier suds, wine and spirits. Having acquired Interbrew, Anheuser-Busch and SAB Miller over 20 years, the group arguably needs better operators and marketers – and fewer dealmakers and cost-cutters.

Does Barrington meet this necessity? He’s not an entirely fresh face. The Marlboro-maker he ran owns one-tenth of AB InBev, a stake it inherited following its purchase of SAB, in which Altria was a big stockholder. It’s also not clear how his experience at Altria gives him useful insight into beer, apart from the fact that alcohol and cigarettes are both physically addictive.

Thankfully, shareholders get a say. A vote to change AB InBev’s bylaws to allow for a non-independent chairman – Barrington – will be on the ballot at the company’s annual meeting on April 24. By rejecting this, they can voice disfavour with the board’s composition since three-quarters of investors are needed to make the change stick. Even with control of more than half of the company, 3G partners, Altria and their allies still need some help.


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