AB InBev launches $142b offer for rival

Merger with SABMiller will give world's largest brewer crucial entry into Africa

BRUSSELS • Anheuser-Busch InBev, the world's biggest brewer, launched its US$100 billion-plus (S$142 billion-plus) offer for nearest rival SABMiller yesterday.

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 next year.

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 (S$150 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 US, 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 as well as crucially enter Africa at a time when some of its home markets, like 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 the number of 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 on the continent will grow by more than anywhere else over the next five years, said industry experts Plato Logic.

AB InBev is offering £44 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, which 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.

Morningstar analyst Philip Gorham said the savings goal of US$1.4 billion was lower than expected but realistic.

While the MillerCoors stake sale may satisfy US 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.

REUTERS

A version of this article appeared in the print edition of The Straits Times on November 12, 2015, with the headline 'AB InBev launches $142b offer for rival'. Print Edition | Subscribe