FILE - In this Tuesday,
March 3, 2011 file photo, Anheuser-Busch InBev CEO
Carlos Brito drinks a beer as he addresses the media
in Leuven, Belgium. British-based brewer SABMiller
accepted in principle a 69 billion pound ($106
billion) takeover offer from Anheuser Busch InBev on
Tuesday, Oct. 13, 2015 that will create the world's
biggest beer company and bring together top U.S.
brands Budweiser and Miller Genuine Draft.
BRUSSELS — The world's top two
beer makers agreed Tuesday to join forces to create a
company that would control nearly a third of the global
market and bring together top U.S. brands Budweiser and
Miller Genuine Draft.
After turning down five offers, British-based brewer
SABMiller accepted in principle an improved takeover bid worth
69 billion pounds ($106 billion) from Anheuser Busch InBev,
which along with Budweiser makes Corona, Stella Artois and
However, the sheer scale of the deal is likely to run into
resistance from regulators, notably in the U.S. and China, amid
concerns it could stifle competition and decrease choice for
consumers. They could force the companies to sell some brands —
such as either the Budweiser or Miller brands.
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 pounds. SABMiller's two biggest shareholders, Marlboro
owner Altria and Colombia's BevCo would get both cash and shares
for their combined 41 percent stake.
AB InBev has until Oct. 28 to come up with a formal offer if
U.K. 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.
The markets think the deal is now very likely and SABMiller's
shares were trading right near the bid price. In early afternoon
trading in London, they were up 9 percent at 39.47 pounds. AB
InBev's share price was 2 percent higher at 100.30 euros in
In statements, the two companies said the all-cash offer
represents a premium of around 50 percent to SABMiller's share
price on Sept. 14, the last trading day before renewed
speculation of an approach from AB InBev emerged.
According to Tuesday's 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
Connor Campbell, a financial analyst at Spreadex, cautioned
that a deal "is going to come under intense, potentially
deal-ending, scrutiny from regulators."
The new company would have annual sales of $73.3 billion and
its market share of 31 percent would dwarf that of its next
biggest competitor, Heineken, with 9 percent.
Market leader AB InBev already has six of the world's largest
beer brands. SABMiller, which is based in London, has Peroni,
Grolsch and Milwaukee's Best among its stable of beers.
For AB InBev, a deal would allow it to bolster its presence
in Africa and Australia, where it is not as dominant as it
currently is in Europe, North Africa and Asia.
The beer industry has been consolidating for the past decade
as brewers seek to gain clout with suppliers, distributors and
"The global beer market overall is largely flat and in some
regions is declining as other beverages such as wine continue to
penetrate," said Professor John Colley of Warwick Business
School. "Micro brewers and their highly differentiated cask ales
also continue to make progress."
AB InBev has a history of making acquisitions and will be
looking to find cost savings from the deal as well as more clout
Colley says to "expect substantial redundancies" over the
coming year, potentially in head offices and country management
"AB InBev has both a reputation and demonstrable track record
for being able to effectively extract these savings," he said.
SABMiller employs 69,000 people in 83 countries. AB InBev has
155,000 workers in 25 countries.
Details of the savings have not been published yet and will
probably have to wait until a deal is formally agreed upon.
Louise Cooper, an independent analyst in London, said one of
the consequences of the higher deal price will be more job
losses than the original plan may have envisioned.
"The more that the bidder offers, the more cost cutting needs
to happen to make the deal work financially," she said. "SAB
executives have done a good job for their shareholders — and
their own executive compensation schemes — by driving up the bid
price. But they have not done such a great job for their
employees, more of whom will have to lose their jobs."