AB InBev launches $107b record SABMiller bid

THE Leuven, Belgium-based Anheuser-Busch InBev (AB InBev), the world’s biggest brewer, on Wednesday, launched its $107 billion offer for nearest rival SABMiller and agreed to sell the latter’s stake in U.S. venture MillerCoors, to help win regulatory approval.

AB InBev, whose takeover of SABMiller would be one of the largest mergers in corporate history, said it expected to achieve $1.4 billion in annual savings four years after completion of the deal, projected for the second half of 2016.

AB InBev has also reached an agreement to sell SABMiller’s 58 percent stake in U.S. joint venture MillerCoors as well as global rights to the Miller brand to the venture’s other shareholder, Denver-based Molson Coors (TAP.N), for $12 billion.

That price tag is higher than some analysts expected, given the shallow pool of buyers, but the cost-savings target is lower, although it does come on top of the $1.05 billion that SABMiller had already identified.

The brewing giant currently controls 25 per cent of the global market share and the merger may push the profile to 33 per cent, according to industry analysts.

The merger will combine 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 rivals Heineken and Carlsberg.

Based on Tuesday’s closing share prices and current exchange rates, the offer is worth 70 billion pounds, or $106 billion.
The takeover, which SABMiller’s board provisionally accepted last month, would be the largest of a British-based company and the fourth-biggest overall of any corporation. It will be backed by a record $75 billion loan.

AB InBev is already number one in the United States, Brazil and Mexico, three of the top four markets in terms of profits.
With SABMiller, it is buying into Latin American countries such as Colombia and Peru and crucially, Africa, at a time when markets such as the United States are weakening as drinkers shun mainstream lagers in favour of craft brews and cocktails.

Africa, where SAB operates in 16 countries, is expected to see a sharp rise in people of legal drinking age and has a fast-growing middle-class developing a taste for branded lagers and ales. Beer consumption there will grow by more than anywhere else over the next five years, according to industry experts Plato Logic.

AB InBev said it would seek a secondary listing and regional headquarters in Johannesburg.
AB InBev is offering 44 pounds per SABMiller share, along with a discounted alternative of mostly shares, designed for SABMiller’s two largest shareholders: cigarette-maker Altria and BevCo, the vehicle of Colombia’s Santo Domingo family, who together own 40.5 per cent of the target company.

Those shareholders have accepted the alternative offer, the two brewers said in a joint statement. Altria said it expected to book a post-tax gain of $8 billion when the deal closed.