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Anheuser-Busch InBev and SABMiller reach tentative agreement on merger

A merger would bring some of the world’s most popular beers under one roof.
A merger would bring some of the world’s most popular beers under one roof. Bloomberg News

Anheuser-Busch InBev is on the verge of truly becoming the King of Beers.

The Belgian company, which bought the St. Louis brewer of Budweiser in 2008, said Tuesday that it had reached an agreement in principle to acquire brewing rival SABMiller for about $104 billion.

A merger would combine the world’s two largest brewers, creating a behemoth that has annual revenue of $64 billion and commands 30 percent of global beer sales.

“The board of SABMiller has indicated to AB InBev that it would be prepared unanimously to recommend the all-cash offer,” subject to an agreement on the other terms and conditions, the companies said in a news release.

The agreement came after weeks of back-and-forth discussions and just before a deadline Wednesday that would have required Anheuser-Busch InBev to make what is considered a formal offer under British takeover rules or not make another approach for up to six months.

A merger would bring some of the world’s most popular beers under one roof, including Budweiser, Corona and Stella Artois from Anheuser-Busch InBev, and Miller Lite, Peroni Nastro Azzurro and Grolsch from SABMiller.

That is why a deal would face regulatory scrutiny and probably require some asset sales, especially in the United States and China.

Analysts for several firms have said that could include the planet’s best-selling beer, China’s Snow. Without some divestiture in China, the Belgian company after the merger would have about 40 percent of China’s beer market — too much for regulators’ comfort. But it could sell back SABMiller’s 49 percent stake in a joint venture it has with its Chinese partner, China Resources Enterprise Ltd.

In the United States, analysts say it is likely that the Justice Department will seek the breakup of MillerCoors, the joint venture that SABMiller formed with Molson Coors in 2008 to combine their U.S. operations. That partnership owns several major brands, including Miller Lite, Coors Lite and Blue Moon.

The deal would also give Anheuser-Busch InBev more exposure to faster-growing emerging markets, particularly in Africa.

Under the terms of the latest proposal, Anheuser-Busch InBev is offering to pay 44 pounds, or about $67, a share for SABMiller. That is up from an offer of 43.50 pounds a share in cash made Monday, and it would represent more than a 50 percent premium to SABMiller’s closing price in mid-September before Anheuser-Busch InBev’s approach was first announced.

The revised proposal also still depends on the support of SABMiller’s two largest shareholders, the U.S. tobacco giant Altria Group and the Santo Domingo family of Colombia. Combined, they own about 41 percent of SABMiller’s outstanding shares.

As part of the latest proposal, Anheuser-Busch InBev would agree to pay a $3 billion fee to SABMiller in the event that the deal failed to receive regulatory approval, the companies said.

The agreement was the fifth offer by Anheuser-Busch since mid-September. SABMiller rejected at least three of the proposals because it said they substantially undervalued the company.

Anheuser-Busch InBev

Top brands: Budweiser, Bud Light, Corona, Beck’s

Annual revenue: $47.06 billion

Size: No. 1; global market share of 21% and almost half the beer sold in the U.S.

SABMiller PLC

Top brands: Miller, Peroni, Milwaukee’s Best, Grolsch

Annual revenue: $26.29 billion

Size: No. 2; almost 10% of global market

Heineken NV

Brands: Heineken, Dos Equis, Tecate, Amstel

Annual revenue: $21.76 billion

Size: 9% of global market

Carlsberg AS

Brands: Carlsberg, Tuborg, Somersby, Kronenbourg

Annual revenue: $9.77 billion

Size: 6% of global market

Tsingtao Brewery Co.

Brands: Tsingtao

Annual revenue: $4.55 billion

Size: 4.7% of global market

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