Anheuser-Busch InBev's pursuit of its London-listed rival SABMiller could be drawing to a successful close after the two firms announced on Tuesday they had agreed "in principle" a £68bn mega-merger.
AB InBev, the world's largest brewer (brands include Budweiser, Stella Artois and Corona) has had as many as four previous offers rejected – at one point it was told its approach was "opportunistic" and "substantially" undervalued its competitor.
The Daily Telegraph says the latest £44-a-share bid is significantly more attractive than those recently rebuffed because it includes an all-cash offer for most ordinary shareholders. A cash-and-share element for larger shareholders, including the tobacco group Altria and the Santo Domingo family of Colombia, has also been upped to more than £39.
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The Financial Times notes that the deal would be the largest ever in the brewery sector and the third-largest in history overall, overtaking AOL's purchase of Time Warner in 2000. It is worth around £68bn in equity, with net debt taking the assumed enterprise value of SABMiller to £75bn. The merger of the two beer giants would boast a turnover of $244bn (£160bn) and create a brewing empire responsible for producing one in three beers consumed around the world.
Such a size is likely to attract the attention of competition regulators and the FT predicts "both companies will be forced to sell a number of assets to win approval for the deal". This is likely to include the MillerCoors brand owned by SABMiller, with "first and final" refusal on a buyout offer contractually guaranteed to its partner Molson Coors.
But the companies are likely to emerge mostly unscathed because their net is spread so widely, which also adds to the value of the tie-up. AB Inbev started life in South America and dominates vast swathes of the market across the continent and in North America. SABMiller, which owns brands that include Foster's, Grolsch and Peroni, is very strong in Africa, the world's largest and fastest growing beer market. Both have a strong presence in Europe and Asia.
The deadline for the offer to be formalised has been extended to 28 October. If an offer is not forthcoming for regulatory or other reasons, AB Inbev will have to pay a $3bn (£2bn) break fee.
