SABMiller agrees AB Inbev takeover deal

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JOHANNESBURG – The world’s two biggest beer producers are set to merge after SABMiller accepted an increased takeover offer from rival Anheuser-Busch InBev.

SABMiller said it had agreed “in principle” a £44-a-share offer, after four previous attempts from AB InBev.

AB InBev’s brands include Budweiser, Stella Artois and Corona, while SABMiller produces Peroni and Grolsch.

If the deal, worth about £70 billion, goes ahead, the newly-created firm will make about 30 percent of the world’s beer.

SABMiller has a workforce of close to 70 000 people in more than 80 countries, and global annual sales of more than $26 billion. AB InBev has a workforce of 155 000 and global revenues of more than $47 billion.

AB InBev had made four previous bid approaches for SABMiller – at £38, £40, £42.15, and £43.50 per share – but they had been rejected by SABMiller, which argued they undervalued the company.

In a statement, the boards of the two firms said they had now “reached agreement in principle on the key terms of a possible recommended offer”.

The two companies have not yet formally finalised the terms of an offer, but the latest development means they have extended the City deadline for a firm offer until 28 October.

SABMiller’s African brands are actually one of the main reasons AB InBev is so thirsty for this merger. Carlos Brito, the chief executive of AB InBev, has said that Africa is a “key piece” of the deal.

SABMiller, of course, has its roots in Africa – South African Breweries was founded around the time of gold rush in Johannesburg in the late 19th Century. As it stands, and if this deal goes through, it would mean that the merged entity would control 31 percent of global beer sales.

AB InBev’s brands are largely concentrated in the Americas and Europe; SABMIller has about 40 brands in Africa. It was the growth of SABMiller’s African brands that really attracted AB InBev.

What makes these brands so tasty is the growing African middle class, an army of consumers that all the major brewing companies have been eyeing up in recent years. As African beer drinkers have become more prosperous over the past 20 years, they have moved out of the informal home-brewing market and started to buy branded beer.

Meanwhile, South Africa’s rand gained against the dollar on Wednesday, boosted by enthusiasm over the potential sale of brewer SABMiller, a deal which could inject as much as R7 billion into the economy, analysts say.

The National Treasury has, however, said it could try to stop the deal if it leads to erosion of the tax base.

“Markets will keenly follow developments in what could be one of the largest acquisitions in corporate history but news headlines are purely instructive at this stage and will impact the rand once the deal has been inked,” Rand Merchant Bank currency analyst John Cairns said.

The rand’s gains also partly reflected a wobbly dollar as investors bet that the US Federal Reserve will have to wait longer before any policy tightening. – BBC/Reuters

 

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