AB InBev, SABMiller brew up $100 b biggest merger in recent history

Thursday, 15 October 2015 00:00 - - {{hitsCtrl.values.hits}}

Reuters: The world’s top two brewers, Anheuser-Busch InBev and SABMiller, have agreed in principle to one of the biggest mergers in corporate history after a near month-long courtship resulted in SABMiller accepting an offer worth more than $100 billion.

The planned combination announced on Tuesday would marry AB InBev’s Budweiser, Stella Artois and Corona brands with SABMiller’s Peroni, Grolsch and Pilsner Urquell and brew almost a third of the world’s beer, dwarfing other major producers like Heineken and Carlsberg.

If it goes through, the deal would rank as the fourth-biggest takeover in history and the largest deal for a UK company. It also breaks all records in the consumer sector and comes only days after news that Dell Inc and EMC agreed the biggest ever deal in the technology sector.

Mergers and acquisition deals done this year stand at a record high as low interest rates embolden companies searching for new areas of growth.

For AB InBev the SABMiller deal will give it more breweries in Latin America and Asia and an entrance to Africa at a time when some of its home markets such as the United States are weakening as drinkers shun mainstream lagers in favor of craft brews and cocktails.

Africa is expected to see a sharp rise in the legal drinking age population in the next few years and a fast-growing middle class which prefers branded lagers and ales to the illicit brews which have long been a feature of markets there.

An agreement between AB InBev and SABMiller was reached on Monday evening, just two days before a deadline that would have forced AB InBev to make a formal bid or walk away for six months.

The breakthrough came when AB InBev bumped up the main offer price for a fourth time, to 44 pounds in cash per SABMiller share, as well as raising the value of an partial share alternative offer by 4% to 39.03 pounds per share.

The partial share offer was expressly designed to suit SABMiller’s two biggest shareholders, cigarette-maker Altria and the Santo Domingo family of Colombia, who together own nearly 41% of the company.

SABMiller said its board was now prepared in principle to recommend the main cash offer to shareholders and has asked for a two-week extension to the deadline, which is now 28 October.