Beer giants AB InBev and SABMiller seek $385b tie-up

The Anheuser-Busch InBev logo is seen outside the brewer's headquarters in Leuven, Belgium
The Anheuser-Busch InBev logo is seen outside the brewer's headquarters in Leuven, BelgiumREUTERS

BRUSSELS/LONDON (REUTERS) - Anheuser-Busch InBev has approached rival SABMiller about a takeover that would form a brewing colossus producing a third of the world's beer.

A merged group would have a market value of around US$275 billion (S$385 billion) at current prices, and would combine AB InBev's dominance of Latin America with SABMiller's dominance in Africa, both fast-growing markets, as well as their breweries in Asia.

"The real attraction is Africa, where AB InBev has no presence, as well as some add-ons in Asia and Latin America," said Societe Generale analyst Andrew Holland.

SABMiller, the world number two and maker of Peroni, Grolsch and Pilsner Urquell, said on Wednesday it had been informed that AB InBev intended to make an offer and that under British rules, it would have to do so by October 14, though it cautioned that no offer has yet been made.

AB InBev, the global leader and maker of Budweiser, Stella Artois and Corona, confirmed its approach to SABMiller's board.

A source close to SAB said it was too early to say what SAB would do, since no offer has been made. "At this stage, we're in wait and see mode," said the source.

Speculation about a merger has swirled for years. The timing of the approach, after more than a decade of acquisitions by AB InBev, follows a roughly 15 percent drop in SABMiller's share price from early August to mid-September. "It's exactly the moment they've been waiting for," said Morningstar analyst Phil Gorham. "It makes sense financially for the first time in years."

AB InBev will have to pay at least 40 pounds ($86.9) per SAB Miller share, and maybe as much as 45 pounds, according to analysts - implying an overall price of up to US$130 billion, including SABMiller's debt.

That would make it one of the largest takeovers in history.

Shares in SAB closed up 19.9 per cent at 36.14 pounds. AB InBev's were up 6.4 percent. Rivals Heineken, Carlsberg and Diageo also rose on speculation SAB might seek another merger as a defence strategy, as it did last year when it offered to buy Heineken, but was rebuffed.

Since then it has combined its African soft drink bottling business with that of Coca-Cola and in recent weeks there has been speculation about it combining with Diageo or Australian drinks firm Coca-Cola Amatil.

The global beer market is dominated by a handful of brewers increasingly moving into new markets as they look to shrug off weakness in North America and Europe where consumers increasingly choose craft beers made by independent players or wine or spirits.

AB InBev's global beer market share was 21.1 per cent in 2014 and SABMiller's 15 per cent, according to industry experts Plato Logic. Heineken is the No. 3.