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SABMiller agrees to £70bn AB Inbev takeover

SABMiller has accepted “in principle” the latest takeover bid from rival AB Inbev, bringing the deal that would make the largest beer company in the world one step closer.

The deal would make a brewer that sells one in three beers worldwide, and owns half of the industry's profits (Photo: SABMiller)
The deal would create a single brewer that sells one in three beers worldwide and owns half of the industry’s profits (Photo: SABMiller)

The London-based Peroni and Miller brewer agreed to the key terms of the latest offer from AB Inbev to take control of its shares for £44 each, meaning a deal worth roughly £70 billion.

In a statement, SABMiller’s board said that it would be prepared to unanimously recommend the offer to its shareholders.

A tie up between the two largest brewers in the world would create a company with revenues of US$64 billion (£42bn) per year, AB Inbev estimates.

The agreement comes after pressure began mounting on the SABMiller board when its largest shareholder, Altria Group, publicly disagreed with its position on previous offers.

SABMiller had already turned down offers of £38, £40, £42.15, and £43.50 per share, claiming they “very substantially undervalued” the company.

But Belgian company AB Inbev, brewer of Budweiser and Stella Artois, accused SABMiller of “refusing to meaningfully engage” with negotiations.

The two boards have now agreed to proceed with formulating a concrete deal by seeking regulatory clearances and shareholder approval.

AB Inbev would be subject to a £2bn break fee, payable to SABMiller, if it fails to obtain these approvals.

The deadline for a firm offer, which was due to expire on Wednesday (14 October), has been extended until 28 October.

The all-cash offer, partly funded by third-party debt, represents a premium of approximately 50% to SABMiller’s closing share price of £29.34 per share on 14 September 2015 – the last trading day before the negotiations were made public.

Analysis: where next for big brewers?

With the deal seemingly guaranteed to go ahead, market analysts are now wondering what could be the next step in the global brewing industry.

Jeremy Cunnington of Euromonitor International said: “The deal creates a global giant accounting for 29% of the 200 billion litre global volumes, more than three times bigger than its nearest rival, Heineken.

“With all the major merger and acquisition targets now taken, and mergers and acquisitions so important to brewers’ growth, it raises the question of where next for global brewers as they bid to carry on growing.”

It is thought that it the deal will have little impact on the consumer, as the two companies are already by far the largest brewers in the industry.

Following the shedding of some brands in the US and China to fit with market rules, there will still be good competition coming from the likes of Heineken, Diageo, Molson Coors and Carlsberg, among others.

“At a total market level there should be no competition issues as the market is already competitive with four major players,” Mr Cunnington said.

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