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AB InBev, SABMiller Reach “Agreement In Principle” On $106 Billion Deal

October 13, 2015

After years of pursuit, top global brewer AB InBev appears to have finally corralled leading rival SABMiller. The two brewing giants issued a joint statement this morning that they have reached an “agreement in principle” on key terms of a deal that would see AB InBev pay £44 ($67) a share, or about $106 billion, to acquire SABMiller, representing a 50% premium to the latter’s share price on September 14, the day before renewed speculation erupted about a potential merger. The proposed deal would create a global brewing colossus with a market share as high as 35%, according to Impact Databank.

SABMiller’s largest shareholder, Altria Group, which owns a 27% stake, hailed the agreement, and SABMiller’s board—which rejected three previous offers—is expected to recommend it to shareholders. Under U.K. takeover rules, the two parties have until October 28 to iron out final terms, and AB InBev has agreed to pay $3 billion if the deal falls through.

While the long-awaited AB InBev-SABMiller tie-up has major global implications, the world’s two largest beer markets—China and the U.S.—may see little change. In the U.S., due to AB InBev already holding a nearly 50% market share, regulators will likely require SABMiller to relinquish its 58% stake in MillerCoors, its joint venture with Molson Coors that has a market share of around 25%. In China, SABMiller owns a 49% stake in top brewer CR Snow, and AB InBev is the third-leading player.

Meanwhile, U.S. regulators have fixed their gaze on AB InBev in a separate matter. The U.S. Justice Department and California attorney general are questioning whether AB’s pending purchases of wholesalers in Oakland and San Jose could potentially bottle up distribution of several craft beer brands handled by those operations. AB currently owns 17 of the 500 distributors that handle its products in the U.S., the Wall Street Journal reported, and has made a number of moves at the wholesale tier lately.

 

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