LONDON: The world’s top brewer Anheuser-Busch InBev clinched on Wednesday (Thursday in Manila) a gigantic $121-billion deal for its nearest rival SABMiller, in the third biggest takeover in global corporate history.
The blockbuster transaction, worth the equivalent of 112 billion euros including debt, will bring together InBev’s top lagers like Beck’s, Budweiser and Stella Artois, with SABMiller brands Foster’s, Grolsch and Peroni.
Belgian-Brazilian behemoth InBev is eager to tap into booming developing markets in Africa and China, where SABMiller’s joint venture produces Snow—the world’s best selling beer by volume.
InBev will pay £44 per share in cash for SABMiller, which has also agreed to sell its 58-percent stake in US unit MillerCoors for $12 billion to Molson Coors to help win regulatory approval, it said in a joint statement presenting the formal offer.
“The boards of Anheuser-Busch 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,” the pair said.
The transaction is set to complete in the second half of 2016, subject to shareholder and regulatory approvals—otherwise InBev will face a $3-billion break fee.
The main listing of the merged company is set to be in Brussels, where InBev is currently quoted.
SABMiller, which started out serving miners in South Africa, is quoted in London and Johannesburg, but is set to be de-listed from the British capital.
No reason was given for the move, but experts said SABMiller’s large South African shareholder bloc had pushed to keep the Johannesburg listing so that they could retain the stock in their pension portfolios.
South Africa requires pension schemes to invest 75 percent of their funds in domestic shares.
Third biggest takeover
The agreement marks the world’s third biggest takeover in corporate history, according to financial information provider Dealogic.
The two bigger deals were telecom company Vodafone’s purchase of Germany’s Mannesmann for $172 billion in 1999 and Vodafone’s sale of its 45 percent stake in Verizon Wireless to Verizon for $130.1 billion in 2013.
“This kind of deal underpins the fact that there is still plenty of cash on the sidelines to be put to use if there is value in synergies,” said Mike McCudden, head of derivatives at stockbroker Interactive Investor.
InBev, which also brews Hoegaarden and Leffe beers, added that the takeover will “strengthen AB InBev’s position in key emerging regions with strong growth prospects such as Asia, Central and South America, and Africa.”
The group will target annual efficiency savings of “at least” $1.4 billion by the end of the fourth year following completion, sparking fears of job losses.
“We believe this combination will generate significant growth opportunities and create enhanced value to the benefit of all stakeholders,” said AB InBevchief Carlos Brito in the statement.
SABMiller chairman Jan du Plessis added that the British group benefited from its presence across the developing world—and the takeover price had won the board’s unanimous backing.
“SABMiller has an unmatched footprint in fast-growing developing markets, underpinned by our portfolio of iconic national and global brands,” du Plessis said.
The brewing industry has faced pressure to consolidate amid increasing demand for so-called craft beers that are brewed by smaller independent firms.
However, monopoly rules prevent any one company cornering the market, and the two brewers said the sale of SABMiller’s holding in US business MillerCoors, which makes Coors Light, was designed to “promptly and proactively address regulatory considerations”.
Jeremy Cunnington, senior alcoholic drinks analyst at Euromonitor International, said the new merged company would account for 29 percent of the global 198 billion liter beer market.
“This will make it more than three times bigger than its nearest rival, Heineken with 9 percent,” he said.
“The deal is a culmination of over a decade of mass consolidation.”
The two brewing giants had already agreed in principle last month on the £44-per-share deal, sending share prices higher at the time and leading to relatively modest gains on Wednesday.
At close of trade in London, SABMiller’s share price settled 1.86 percent higher at £40.50 on the British capital’s rising FTSE 100 index. AB InBev shares added 2.16 percent to 113.60 euros in trading in Brussels.