AB InBev agrees huge takeover of SABMiller

AB InBev made a formal $107 billion offer for SABMiller on Wednesday, sealing a long-anticipated deal that combines the world’s biggest brewers into a company controlling about half the industry’s profit.

The sale of MillerCoors – which sells brands including Miller Lite, Miller High Life and Blue Moon – is necessary for AB InBev to gain U.S. regulatory approval to buy SABMiller.

“We believe this combination will generate significant growth opportunities and create enhanced value to the benefit of all stakeholders”, Anheuser-Busch InBev chief executive Carlos Brito said. It also puts a huge chunk of the world’s beer market in the hands of one company.

Anheuser-Busch InBev said that it expected to achieve about $1.4 billion in annual cost savings by the end of the fourth year after the deal’s completion.

The union of the two brewers will create the world’s largest brewing company. Although the discount of the PSA vs the cash offer has narrowed from 11% to 5%, we would expect most shareholders to accept cash, given that the restricted shares will be unlisted with a five-year lock-up.

AB InBev is offering £44 per SABMiller share, along with a discounted alternative of mostly shares, designed for SABMiller’s two largest shareholders, Altria and BevCo.

AB InBev said it had agreed to sell SABMiller’s 58 per cent stake in MillerCoors to the venture’s other major shareholder, Molson Coors, for $12-billion. AB InBev shares added 0.90 percent to 112.20 euros in trading in Brussels. As part of the deal, SABMiller also agreed to sell Miller’s global business to MolsonCoors. The largest brewery took similar steps before it acquired Grupo Modelo back in 2012, but the United States Justice Department still filed a lawsuit in 2013, forcing AB InBev to restructure the deal.

The research firm Euromonitor worldwide has estimated that a combined Anheuser-Busch InBev-SABMiller could account for 29 percent of global beer sales, after selling a few assets to win regulatory approval.

Today, SABMiller-which has a secondary listing on Africa’s largest stock exchange, the Johannesburg Stock Exchange (JSE)-is the second largest company on the JSE by market capitalization.