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SABMiller and Belgium's Anheuser-Busch InBev merge in £68bn bid

  • SABMiller finally backs £68bn bid from Belgium's Anheuser-Busch InBev
  • InBev, which makes Peroni and Grolsch, was world's biggest beer co.
  • UK-listed SABMiller, which makes Stella and Budweiser, was global no.2 
  • Biggest takeover in UK history creates beer giant worth more than £180bn 
  • Weeks of wrangling over price has seen SABMiller reject series of offers

By Mark Shapland For This Is Money

Published: 03:03 EST, 13 October 2015 | Updated: 08:37 EST, 13 October 2015

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The world's two biggest brewers merged today in a mega-deal that will create a £180billion beer giant responsible for one in every three pints drunk around the world - but it could send beer prices higher.

The deal sees Peroni, Grolsch, Foster's, Stella Artois, Budweiser and Corona all being made by the same company and the lack of competition in the market means the price of a pint will almost certainly rise.  

London-listed SABMiller has accepted a £68billion bid from the global number one brewer , Belgium's Anheuser-Busch InBev, in the biggest deal in UK corporate history. It is one of the top five corporate deals in world history.

Completed: Anheuser-Busch InBev has finally got its hands on SABMiller after days of wrangling over price

Completed: Anheuser-Busch InBev has finally got its hands on SABMiller after days of wrangling over price

The new company will control over 50 per cent of the UK beer market and could according to some experts add as much as 10p to a pint of beer as it seeks to take advantage of its dominant position in the industry. The average pint of Grolsch is currently £3.75.

Eamonn Ferry, at Exane, said: 'More consolidation, means higher prices because there is less competition. It is a nailed on certainty that beer prices are going up above inflation.'

The deal comes after weeks of wrangling over the price, in which SABMiller has rejected a series of offers from AB InBev as too low - but its board has finally capitulated to an improved £44-a-share offer from its rival.

SABMiller said its board was prepared to unanimously back the all-cash offer, having spurned four previous approaches.

The decision had ultimately rested with the SABMiller's two biggest shareholders, tobacco giant Altria and the Santo Domingo family of Colombia, who own 26.6 per cent and 13.9 per cent respectively. 

Global beer company market share 

Anheuser-Busch InBev - 20.8 per cent

SABMiller - 9.7 per cebnt

Heineken - 9.1 per cent

Carlsberg - 6.1 per cent

China Resources Enterprise - 6 per cent

The offer represents a 50 per cent mark-up on the closing price of SABMiller's shares before the bid battle started in mid-September.  SABMiller shares are up 9 per cent, or 329.0p at 3951.1p in early trading.  

The two companies still have to agree formal terms, but have extended the deadline to make a firm bid under City takeover rules to October 28.

But if AB InBev - which owns Budweiser, Stella Artois, and Corona cannot get the green light from regulators for the deal or if its shareholders do not back the takeover, the brewer would have to pay SABMiller a break fee of $3billion.

AB InBev had always said it did not want to go hostile with its takeover plans, but was becoming frustrated by SABMiller's tactics and last week urged shareholders in SABMiller to force its board into serious takeover talks.

SABMiller chairman Jan du Plessis had called his firm the 'crown jewel of the global brewing industry'.

Warning: The deal today could mean pint prices rise above inflation due to a lack of competition

Warning: The deal today could mean pint prices rise above inflation due to a lack of competition

Sky high: SABMiller's share price has been flying sky high since news of the takeover approach broke in September

Sky high: SABMiller's share price has been flying sky high since news of the takeover approach broke in September

AB InBev already has a 155,000-strong global workforce and makes more than $47.1billion in global revenues.

And as a result  there are major concerns the deal could create a near-monopoly in some markets and could force the sale of some assets by both SABMiller and AB InBev to get it past antitrust bodies.  

The deal includes a partial share alternative to allow Altria and BevCo, the Colombians’ investment vehicle, to avoid huge tax bills if they sold their stakes for cash. 

AB InBev said that, as with its earlier proposal, its offer was conditional on Altria and BevCo accepting the partial share alternative.

The share alternative, which has a small cash element, has been raised from £38.88 to £39.03. That increases the average price for the whole offer to £42.02 a share, valuing SABMiller at £68.07 billion, or about £75billion including debt.  

Institutional investors including Aberdeen Asset Management and South Africa’s Public Investment Corporation have backed the SABMiller board up to this point and are expected to maintain their support with most indicating they were willing to accept a deal.  

SABMiller attempted to acquire rival Heineken a year ago, but its advances were rebuffed.  

Top 5 corporate mergers of all time - AB InBev and SABMiller new in at number 4

1. Mannesmann AG (Germany) and Vodafone (UK) in 1999

Value: £112bn ($180bn)

The biggest acquisition in history saw Vodafone (again!) swallow up its German counterpart Mannesmann. Voda tabled a hostile bid for Mannesmann in November 1999; a long struggle with the Mannesmann’s shareholders and the German government ensued.

2. Time Warner (US) and America Online (US) in 2000

Value: £104bn ($165bn)

Not just one of the biggest corporate mergers, but also regarded as one of the worst. Time Warner hoped its tie-up with internet dial-up firm AOL would help it leap forward into an online future. But the deal quickly soured. 

3. Verizon Wireless (US) and Verizon Communications (US) in 2013

Value: £84bn ($130bn)

Verizon Communications took full control of US network Verizon Wireless from its joint venture partner, the UK’s Vodafone.

4. Anheuser-Busch InBev (Belgium) and SABMiller (UK)

Value: £68bn ($104bn)

The combined mega-brewer is worth up to £180billion and responsible for creating close to a third of the world's beer. It would also have more than three times the market share of the next biggest beer company, Heineken. 

5. Warner-Lambert (US) and Pfizer Inc (US) in 2000

Value: £56bn ($90bn)

Pfizer created the biggest pharmaceutical company in the US when it gobbled up Warner-Lambert in 2000. The tie-up began with a hostile takeover bid from Pfizer to thwart Warner-Lambert’s attempt to hook up with another pharma company, AHP.

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