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Bottoms Up! AB InBev, SABMiller Agree on Takeover Terms

Oct. 13, 2015
The $122 billion deal is the third-largest corporate takeover ever and will create a brew behemoth that will reach one-third of the world's beer drinkers.

LONDONThe world’s biggest brewer, Anheuser-Busch InBev, announced Tuesday that it finalized a $122 billion deal to gulp down British rival SABMiller, creating a beer behemoth that will serve one in three drinkers globally.

AB InBev, the Belgian-Brazilian brewer that dominates the global market with top brands like Budweiser and Stella Artois, said it reached an informal agreement with an initially reluctant SABMiller on the fifth time asking.

Including debt, the cost of buying SABMiller, British producer of Foster’s and Grolsch, will be $122 billion (£80 billion, 107 billion euros), according to Dealogic, making it the third-biggest takeover in corporate history after two mega-mergers across the telecoms sector.

“The boards of AB InBev and SABMiller announce that they have reached agreement in principle on the key terms of a possible recommended offer,” the two groups said in a joint statement.

The outline deal comes at a time of growing pressure for consolidation in the brewing industry, which is faced with the increased popularity of so-called craft beers that are brewed by smaller independent firms.

Swallowing SABMiller, born in the 19th-century Johannesburg gold rush, will broaden AB InBev’s reach in some of the world’s fastesr-growing beer markets, including the thirsted-after prize of Africa.

Together, the two brewers will be responsible for one in three beers sold globally, according to market research group Euromonitor International, which has warned that such a merger would attract close scrutiny by regulators.

News of the deal sent shares in SABMiller, the world’s second-largest brewer, surging on the announcement, with markets expecting a deal to go through despite regulatory hurdles.

Nevertheless, the deal will be closely examined by the competition authorities, said Connor Campbell, analyst at Spreadex trading group,

“Any pact that would cause a single company to produce a third of the world’s beer is going to come under intense, potentially deal-ending, scrutiny from regulators,” he said.

AB InBev, which has until October 28 to make the bid formal, undertook to pay a “break fee” of $3 billion if the deal falls through because of regulatory objections or a rejection by its own shareholders.

SABMiller indicated that its board would be prepared unanimously to recommend the all-cash offer of £44.00 per SABMiller share to its shareholders, the joint statement said.

The new all-cash offer, an improvement on Monday’s bid of £43.50 a share, represents a premium of about 50% to SABMiller’s closing share price on September 14, the final business day prior to renewed speculation of an approach by AB InBev. 

SABMiller, which also makes beers Peroni and Pilsner Urquell, had rejected the AB InBev’s previous bids as being too cheap.

AB InBev recently reported a sharp fall in second-quarter profits owing to weak economic conditions in several markets.

In order to firm up its business, SABMiller bought London-based craft beer company Meantime earlier this year for an undisclosed sum, as big players in a saturated beer market eye opportunities in the fast-growing segment.

Elsewhere, Dutch beer giant Heineken has bought half of U.S.-based beer maker Lagunitas, hoping to cash in on the global rocketing popularity of craft beers.

Copyright Agence France-Presse, 2015

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