AB InBev formalizes offer to buy rival SABMiller

The sale includes the Miller brand internationally.

ABInBev and SABMiller said Molson Coors had agreed to buy the remaining 50% stake in Miller Coors for 12 billion USA dollars (£7.9 billion).

“The boards of AB InBev and SABMiller are pleased to announce that they have reached agreement on the terms of a recommended acquisition of the entire issued and to be issued share capital of SABMiller by AB InBev”.

AB InBev controls 45% of the U.S. beer market and adding MillerCoors’s 25% could have led the U.S. authorities to block the deal.

For 41.6 per cent of stock, AB InBev is offering a partial-share alternative, essentially a combination of cash and unlisted stock, translating into a lower per-share price of £ 41.85.

Though the company continued to focus on building brand strength and achieve positive pricing, earnings of $1.40 declined 4.1% year over year due to lower sales, unfavorable foreign currency and increased brand investments. That deal, the brewing industry’s biggest merger ever, has raised concerns about how it will affect competition in the U.S. By offloading the MillerCoors business, AB InBev and SABMiller are more likely to get regulatory approval for their deal.

The share-and-cash offer has been designed specifically so that the FTSE 100 company’s two biggest shareholders, tobacco company Altria and Colombia’s Santo Domingo family, can avoid a huge tax bill. “Our joint portfolio of complementary global and local brands would provide more choices for beer drinkers in new and existing markets around the world”.

SABMiller’s were up 1.3% in morning trading in London while AB InBev’s shares in Brussels climbed 1.1%.

The world’s two largest brewers are combining, creating a beer powerhouse that will brew almost a third of the beer sold around the globe. For Molson Coors, owning all of the venture would boost its earnings per share by about 20 percent, according to an estimate by Ian Shackleton, an analyst at Nomura Securities. Molson Coors CEO Mark Hunter described the deal as “a game-changing opportunity for Molson Coors”.