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AB InBev launches SAB bid, to sell MillerCoors stake
[BRUSSELS/LONDON] Anheuser-Busch InBev, the world's biggest brewer, launched its US$100 billion-plus offer for nearest rival SABMiller on Wednesday and agreed to sell the latter's stake in US 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 US$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 per cent stake in US joint venture MillerCoors to the venture's other shareholder, Denver-based Molson Coors, for US$12 billion.
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 (S$150.9 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.
AB InBev is already the biggest player in the United States, Brazil and Mexico, three of the top four markets in terms of profits.
By buying SABMiller, it will add Latin American countries such as Colombia and Peru and crucially enter Africa at a time when some of its home 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 rather than the illicit brews traditionally drunk.
Beer consumption there will grow by more than anywhere else over the next five years, according to industry experts Plato Logic.
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 had accepted the alternative offer, the two brewers said in a joint statement.
SABMiller shares were up 2 per cent at 40.53 pounds at 0920 GMT on Wednesday, reflecting a degree of uncertainty around regulatory hurdles before the transaction is concluded. "With today's developments, execution is still important but they have a bit of breathing room," said Morningstar analyst Philip Gorham.
He said the savings goal of US$1.4 billion was lower than expected but realistic. It is offset, he said, by a higher-than-anticipated price for the MillerCoors stake, which also includes the international rights to the Miller brand.
"They beat their synergies target with the Anheuser-Busch acquisition so the same could happen here ... if there is upside, they can create significant value." While the MillerCoors stake sale may satisfy U.S. regulators, it remains to be seen whether the new company will have to divest SABMiller's 49 per cent stake in CR Snow, China's leading brewer, according to Plato. AB InBev already has about 14 per cent of the Chinese market.