The megabrewer merger is on. After weeks of playing hard to get, SABMiller has finally succumbed to AB InBev’s advances and agreed to create what will be the largest beer company in the world.
After its Belgian-Brazilian rival made a formal offer of £43.50 a share last night, SABMiller confirmed this morning that it had accepted an informal proposal of £44 a share, along with a discounted partial share option limited to 41% of its shares (aimed at AB InBev’s two largest shareholders, cigarette maker Altria and the Santo Domingo family).
The offer values the British-South African brewer at around £69bn (or £75bn if you include its net debt, says the FT) and is a 50% premium on its share price before news of AB InBev’s interest seeped out on September 14. It was only on this fifth attempt that SABMiller’s board finally decided it wasn’t ‘under valued’.
The deadline for a formal agreement has now been moved two weeks to October 28. If it clears regulatory hurdles it’ll be the biggest ever UK takeover and the third-largest in the world. If it fails AB InBev has to shell out a hefty $3bn (£2bn) break fee.
The acquisition will unite AB InBev brands like Stella Artois and Budweiser with SABMiler’s Carling and Peroni, although its American beer Coors will probably have to be sold when competition regulators demand the new lager leviathan sells assets. More importantly, with consumption flat as a warm beer in major, developed markets it will give AB InBev access to fast growing markets in Africa.
Investors are toasting the deal - SABMiller’s London-listed shares are up 9% to 3,948p, while AB InBev’s bubbled up 1.5% to just under €100) - but there’s a risk the Chinese slowdown and US interest rate rises could mean emerging markets run out of cash to splash on having a good time. Or maybe they’re distracted by coming up with a name for the newborn beer behemoth. Forget SABIn ABBevMiller, MT votes ABsolutely SABulous.