The world’s top brewer Anheuser-Busch InBev clinched Wednesday 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.
– Third biggest takeover –
“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 agreement marks the world’s third biggest takeover in corporate history, according to financial information provider Dealogic, and is also the largest ever takeover of a British company.
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.
“Deals of this scale should prompt some follow through m&a activity but overall longer term investor sentiment remains fragile.”
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”.
– Consolidation pressure –
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 InBev chief executive 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.
“However, 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.”
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 litre 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.
In afternoon London deals, SABMiller’s share price rallied 2.63 percent to £40.80 on the British capital’s rising FTSE 100 index. AB InBev shares added 0.90 percent to 112.20 euros in trading in Brussels.