Anheuser-Busch InBev completes $106B deal for SABMiller

LONDON -- Anheuser-Busch InBev said Wednesday that it had completed an agreement to acquire its closest rival, SABMiller, for nearly $106 billion, creating what it said would be the first "truly global brewer."

The deal, reached after months of negotiations, would create a beer industry giant with annual revenue of about $64 billion and would give Anheuser-Busch InBev, already the world's largest brewer, a substantial operation in Africa, where it has little presence, and greater dominance in Latin America.

The transaction is expected to receive regulatory scrutiny given the size of the new entity and its big presence in several markets, including the United States. Anheuser-Busch InBev, the maker of Budweiser, Corona Extra and Stella Artois, said it would seek to "promptly and proactively" address those concerns.

In the effort to appease regulators, SABMiller said Wednesday that it would sell its 58 percent stake in MillerCoors in the United States to its joint venture partner Molson Coors Brewing for about $12 billion. That deal includes the global rights to the Miller brand and would make Molson Coors the second-largest brewer in the United States, behind Anheuser-Busch InBev.

"We believe the strategic rationale behind the combination is extremely compelling," Carlos Brito, the Anheuser-Busch InBev chief executive, said on a conference call with reporters on Wednesday.

"It brings immediate value realization for SABMiller shareholders," he added. "It creates new growth prospects for the combined company. It allows us to build a better world together. To put it simply, we believe more can be achieved together than apart." After weeks of discussions, Anheuser-Busch InBev and SABMiller reached an agreement in principle on Oct. 13. Since then, they had been negotiating the details of the merger.

The announcement that they had completed the deal came just before a deadline Wednesday, under British takeover rules, for Anheuser-Busch InBev to make what is considered a formal offer. If Anheuser-Busch InBev had missed the deadline, it would not have been allowed to make another approach for up to six months.

SABMiller's board of directors is recommending that shareholders accept the deal. The merger is expected to be completed in the second half of next year.

Anheuser-Busch InBev is offering to pay 44 pounds in cash per share for SABMiller. That would be a premium of more than 50 percent on SABMiller's closing price in mid-September, before Anheuser-Busch InBev's approach was announced.

SABMiller's two largest shareholders -- the U.S. tobacco giant Altria and the Santo Domingo family of Colombia -- have agreed to support the deal and to accept a partial share alternative in which they would receive restricted shares and a smaller amount of cash at 41.85 pounds a share, a discount to the cash price. That would allow them to avoid a huge tax bill from the sale of their holdings.

As a result, Anheuser-Busch InBev would probably pay 69.8 billion pounds.

"AB InBev's offer represents an attractive premium and cash return for our shareholders and secures earlier delivery of our long-term value potential, which is why the board of SABMiller has unanimously recommended AB InBev's offer," Jan du Plessis, the SABMiller chairman, said in a news release.

Anheuser-Busch InBev said that it expected to achieve about $1.4 billion in annual cost savings by the end of the fourth year after the deal's completion.

The research firm Euromonitor International has estimated that a combined Anheuser-Busch InBev-SABMiller could account for 29 percent of global beer sales, after selling some assets to win regulatory approval. It would also be more than three times as large in terms of sales as its next closest competitor, the Dutch brewer Heineken, according to Euromonitor.

The combined company expects to have a primary listing of its shares in Belgium, where Anheuser-Busch InBev is based, and secondary listings in Mexico, South Africa and the United States.

Selling SABMiller's stake in MillerCoors could eliminate a major regulatory hurdle: Many analysts had predicted that the U.S. Justice Department would seek the sale or breakup of the joint venture.

MillerCoors was formed by SABMiller and Molson Coors in 2008 to combine their U.S. operations. That partnership owns several major brands in the United States, including Miller Lite, Coors Light and Blue Moon.

As part of the deal to sell its stake, SABMiller would give up its rights to the Miller brand worldwide and MillerCoors would retain the rights to sell brands it currently holds in its portfolio in the United States, including Peroni and Pilsner Urquell. That sale depends on the closing of the Anheuser-Busch transaction.

"In consolidating ownership of MillerCoors, we will strengthen our presence in the highly attractive U.S. beer market, further improve our global scale and agility, benefit from significantly enhanced cash flows, and capture substantial operational synergies," Mark Hunter, the Molson Coors president and chief executive, said in a news release.

This story was originally published November 11, 2015 at 5:17 PM with the headline "Anheuser-Busch InBev completes $106B deal for SABMiller ."