At the sixth time of asking, British-based brewer SABMiller accepted in principle on Tuesday a £70-billion ($108-billion) takeover offer from Anheuser Busch InBev that will create the world’s biggest beer company and bring together top US brands Budweiser and Miller Genuine Draft.
Having dismissed previous proposals over the past few weeks as undervaluing the company, the directors of SABMiller unanimously agreed to an offer that values each SABMiller share at £44, £6 more than its first offer almost a month ago. SABMiller’s two biggest shareholders, Marlboro owner Altria and Colombia’s BevCo, would get both cash and shares for their 41% stake.
AB InBev, which owns Budweiser among a range of top-selling brands, has until October 28 to come up with a formal offer if UK regulators grant an extension to the takeover talks. In that time, the two sides will work on the terms and conditions of the takeover offer as well as the financing of the deal.
If the merger deal is formally agreed on, the combined company will control some 31% of beer sales around the globe. Given the size of the company, there are likely to be regulatory concerns, notably in the US and China as authorities worry about the impact on consumer choice and competition.
In statements, the two companies said the all-cash offer represents a premium of around 50% to SABMiller’s share price on September 14, the last trading day before renewed speculation of an approach from AB InBev emerged. For the cash and stock part, the premium is around 33%.
According to statements, AB InBev has agreed to pay $3 billion to SABMiller if the deal fails to close because of failure to get regulatory approval or the clearance of AB InBev shareholders.
Connor Campbell, a financial analyst at Sprweadex, cautioned that that any pact leading to a single company producing a third of the world’s beer “is going to come under intense, potentially deal-ending, scrutiny from regulators.”
AB InBev already has six of the world’s largest beer brands, including Budweiser, Corona, Stella Artois and Beck’s, while SABMiller has Peroni, Grolsch and Milwaukee’s Best among its stable of beers.