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Wednesday 7 December 2016

World's largest brewer plans mega-takeover of rival SABMiller in year's biggest deal

Philip Blenkinsop and Martinne Geller

Published 17/09/2015 | 07:36

Anheuser Busch's Budweiser and Bud Light Beer can be seen on display at a new Wal-Mart store in Chicago, January 24, 2012. REUTERS/John Gress
Anheuser Busch's Budweiser and Bud Light Beer can be seen on display at a new Wal-Mart store in Chicago, January 24, 2012. REUTERS/John Gress

Anheuser-Busch, the world's largest brewer, has approached rival SABMiller about a takeover that would form a colossus producing a third of the world's beer.

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A merged group would have a market value of around $275 billion at current prices, and would combine AB InBev's dominance of Latin America with SABMiller's of Africa, both fast-growing markets, as well as their breweries in Asia.

"The real attraction is Africa, where AB InBev has no presence, as well as some add-ons in Asia and Latin America," said Societe Generale analyst Andrew Holland.

AB InBev and other top brewers are trying to move into new markets as they look to shrug off weakness in North America and Europe, where consumers increasingly choose craft beers made by independent players or wine or spirits.

SABMiller, the world No. 2 and maker of more than 200 beers including Peroni, Grolsch and Pilsner Urquell, said on Wednesday it had been informed that AB InBev intended to make an offer which it would have to do by Oct. 14 under British rules.

AB InBev, controlled by 3G Capital, a private equity fund run by a group of Brazilian investors, confirmed its approach. 3G, known for its focus on cost cuts at the expense of marketing, has previously orchestrated takeovers of Burger King, ketchup maker Heinz and Kraft Foods. Its brands include Budweiser, Stella Artois and Corona.

A source close to SAB said it was too early to say what it would do since no offer has been made.

"At this stage, we’re in wait and see mode," said the source.

Speculation about a merger, likely to raise antitrust concerns in markets such as the United States and China, has swirled for years. The timing of the approach, after more than a decade of acquisitions by AB InBev, follows a roughly 15 percent drop in SABMiller's share price since August.

"It's exactly the moment they've been waiting for," said Morningstar analyst Phil Gorham. "It makes sense financially for the first time in years."

AB InBev will have to pay at least 40 pounds ($62) per SAB Miller share, and maybe as much as 45 pounds, according to analysts - implying an overall price of up to $130 billion, including SABMiller's debt.

That would make it the biggest M&A deal of 2015, already shaping up to be a record year since the 2008 financial crisis in terms of deal volume, and one the five largest takeovers since 1980.

Shares in SAB closed up 19.9 percent at 36.14 pounds, giving it a market capitalization of $90 billion. AB InBev's were up 6.4 percent. Rivals Heineken, Carlsberg and Diageo also rose on speculation SAB might seek another merger as a defence strategy, as it did last year when it offered to buy Heineken, but was rebuffed.

Reuters

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