The world’s two largest beermakers have struck a £68bn deal to combine, in what would rank as the third-biggest takeover in history.
UK-listed brewer SABMiller said it had agreed “in principle” to an acquisition by its larger rival Anheuser-Busch InBev, accelerating the pace of frenzied corporate dealmaking.
The combination would create a brewer responsible for one in every three beers sold globally and would require several knock-on deals as the two shed assets, from the US to China, to win regulatory approval.
The agreement followed a frantic day of negotiations in London on Monday between Jan du Plessis, the South African chairman of SAB, and Carlos Brito, the Brazilian chief executive of AB InBev.
With Mr du Plessis holding out for more money and Mr Brito refusing, a deal was clinched only after Olivier Goudet, chairman of AB InBev, intervened and said his company would raise its cash offer for a fifth time to £44 a share.
The figure — a 50 per cent premium to SAB’s undisturbed share price a month ago — was enough to sway Mr du Plessis and Alejandro Santo Domingo, who was also involved in the final discussions and whose family is SAB’s second-largest shareholder.
Mr du Plessis said the support of the Santo Domingos was “critical” to a deal. “I have the utmost admiration for the way they have behaved. They are real gentlemen,” he said.
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The final AB InBev proposal values SAB’s equity at £68bn and amounts to £75bn including net debt. The bid includes a partial share offer for 41 per cent of SAB’s stock, which is worth £39.03 a share.
SAB shares rose more than 8 per cent to £39.26 in London, while AB InBev increased 1.6 per cent in Brussels.
SAB’s senior managers stand to share in a potential $2.1bn in vesting shares and options if the deal is completed, according to analysts at Bernstein. Alan Clark, chief executive of SAB, alone stands to receive more than $65m.
Should the deal fall apart due to either regulatory hurdles or opposition from AB InBev shareholders, the company will have to pay a break fee to SAB of $3bn.
If completed, the deal — including debt — would be the third-largest M&A transaction in history, according to Dealogic, overtaking AOL’s purchase of Time Warner in 2000.
Will Hayllar, partner at consultancy OC&C, said: “Mergers are so attractive [in the sector] because they allow companies to build scale, reduce costs and grow brands internationally at premium price points. It’s no wonder the top three brewers have grown their share of the global market from 29 per cent in 2010 to 40 per cent in 2014.”
Although AB InBev and SAB are the two largest beermakers, some analysts have played down the regulatory risks due to the distinct geographic split of their businesses. Nonetheless, a deal would probably take more than a year to complete because it would require approvals in dozens of jurisdictions.
To satisfy antitrust rules in the US, analysts said, the combined company would most probably have to sell MillerCoors, a joint venture controlled by SAB. The likely buyer is SAB’s partner Molson Coors, which has a right to make the first and final bid for MillerCoors.
SAB’s largest South African investor, Public Investment Corp, said it was “critical” that the merged group be listed in Johannesburg.
Devan Kaloo, of Aberdeen Asset Management which has a 2 per cent holding in SAB, praised the SAB board for negotiating “a fair, if not full price”.
Lazard was the sole financial adviser to AB InBev, while Freshfields and Cravath, Swaine & Moore acted as its legal counsel. SAB was advised by Robey Warshaw, JPMorgan Chase, Morgan Stanley and Goldman Sachs on the financial transaction and by Linklaters and Hogan Lovells.
Additional reporting by Andrew England in Johannesburg and David Oakley in London
Date: October 13, 2015