Top brewer AB InBev to gulp down SABMiller
The world's biggest brewer Anheuser-Busch InBev announced Tuesday a $122 billion deal to gulp down British rival SABMiller, creating a beer behemoth serving one in three drinkers globally.
AB InBev, the Belgian-Brazilian brewer that dominates the global market with top brands including Budweiser and Stella Artois, said it had reached an informal agreement with an initially reluctant SABMiller on the fifth time of asking.
Including debt, the cost of buying SABMiller, British producer of Foster's and Grolsch, will be $122 billion (£80 billion, 107 billion euros), according to Dealogic, making it the third biggest takeover in corporate history after two mega mergers across the telecoms sector.
"The boards of AB InBev and SABMiller announce that they have reached agreement in principle on the key terms of a possible recommended offer," the two groups said in a joint statement.
The outline deal comes at a time of growing pressure for consolidation in the brewing industry, which is faced with the increased popularity of so-called craft beers that are brewed by smaller independent firms.
- Born in goldrush -
Swallowing SABMiller, born in the 19th century Johannesburg goldrush, will broaden AB InBev's reach in some of the world's fastest-growing beer markets, including the thirsted-after prize of Africa.
Together, the two brewers will be responsible for one in three beers sold globally, according to market research group Euromonitor International, which has warned that such a merger would attract close scrutiny by regulators.
News of the deal sent shares in SABMiller, the world's second-largest brewer, surging on the announcement, with markets expecting a deal to go through despite regulatory hurdles.
While most companies' share prices were in the red Tuesday following weak Chinese data, in afternoon trade SABMiller soared 9.15 percent to £39.53 in London and AB InBev gained 1.19 percent to 99.52 euros in Brussels.
Nevertheless, the deal will be closely examined by the competition authorities, said Connor Campbell, analyst at Spreadex trading group,.
- Risk to deal -
"Any pact that would cause a single company to produce a third of the world's beer is going to come under intense, potentially deal-ending, scrutiny from regulators," he said.
AB InBev, which has until October 28 to make the bid formal, undertook to pay a "break fee" of $3 billion if the deal falls through because of regulatory objections or a rejection by its own shareholders.
SABMiller indicated that its board would be prepared unanimously to recommend the all-cash offer of £44.00 per SABMiller share to its shareholders, the joint statement said.
The new all-cash offer, an improvement on Monday's bid of £43.50 a share, represents a premium of about 50 percent to SABMiller's closing share price on September 14, the final business day prior to renewed speculation of an approach by AB InBev.
SABMiller, which also makes beers Peroni and Pilsner Urquell, had rejected the AB InBev's previous bids as being too cheap.
AB InBev recently reported a sharp fall in second quarter profits owing to weak economic conditions in several markets.
In order to firm up its business, SABMiller earlier this year bought London-based craft beer company Meantime for an undisclosed sum, as big players in a saturated beer market eye opportunities in the fast-growing segment.
Elsewhere, Dutch beer giant Heineken has bought half of US-based beer maker Lagunitas, hoping to cash in on the global rocketing popularity of craft beers.
© 2015 AFP