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Brewing mega deal nears as AB InBev approaches SABMiller

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A single trade, made yesterday, wagering that shares of Anheuser-Busch InBev NV would surge is now paying off big time.

[LONDON] Anheuser-Busch InBev NV intends to make an offer for SABMiller Plc in a deal that would bring together the world's two biggest beermakers and create a company controlling about half the brewing industry's profit.

News of the potential combination sent shares of both companies soaring, SABMiller gaining as much as 23 per cent to boost its market value to about 60 billion pounds (S$129.7 billion). AB InBev rose as much as 12 per cent.

AB InBev, the maker of Budweiser and Stella Artois, has informed SABMiller of its intentions, although no proposal has been made and no details are known, SABMiller said in a statement Wednesday. AB InBev said it plans to work with the maker of Grolsch and Peroni with a view to gaining a recommendation.

"As time progressed, we confess that our conviction was waning but it appears it is now for the deal," Exane BNP Paribas analyst Eamonn Ferry said in a note.

The acquisition of SABMiller would be the biggest in the industry's history and cap more than a decade of consolidation across brewing companies. AB InBev was formed by a series of purchases by a group of Brazilian businessmen, who snapped up brands from Belgium's Stella Artois to Budweiser.

The beer industry has used consolidation to stave off a slowdown in more established markets such as Europe and the US, where drinkers are swapping to craft brews and wine and spirits, or merely drinking less. AB InBev hasboosted revenue more than fivefold in the last 10 years with the help of nearly US$100 billion in acquisitions. Its growth is now set to slow over the next five years, estimates compiled by Bloomberg show.

The two have been seen as the end game for global beer consolidation because they are not controlled by a family foundation like Amsterdam-basedHeineken NV, or Denmark's Carlsberg A/S, the world's third- and fourth-largest brewers and they have limited geographical overlap.

An acquisition of SABMiller would give AB InBev access to more than US$7 billionof revenue in Africa with brands including Castle lager and almost US$4 billion of sales in Asia, reducing AB InBev's dependence on the Americas and Brazil. With Latin America representing SABMiller's biggest market, a deal would also broaden AB InBev's presence in countries such as Colombia, Ecuador and Peru. Its Latin American brands include Cristal and Aguila.

BLOOMBERG