SABMiller agrees to improved bid by AB-InBev

That’s it. Bye bye SABMiller. Today, on 13 October 2015, it was announced that SABMiller has agreed to sell itself to AB-InBev for USD 104 billion, in a deal that will be the biggest takeover of a UK-listed company in history.

The transaction will create a global brewer that will make about 30 percent of the world’s beer. AB-InBev is the world’s number one brewer and SABMiller ranks second.

In removing a global competitor forever, the deal will be “transformational” in the true sense as it will leave the global beer market with only one dominant player and a very fragmented balance. In terms of global beer volumes, the next-ranking Heineken and Carlsberg will control 9 percent and 6 percent respectively.

The boards of the two companies said they have reached agreement “in principle” on the key terms of a “possible recommended offer” after SABMiller rejected four offers by AB-InBev over the past month.

SABMiller reported AB-InBev is proposing to pay GBP 44 a share in cash. For tax reasons it also offered a partial share alternative structure for 41 percent of the company owned by SABMiller’s two biggest shareholders – the cigarette maker Altria and BevCo, owned by Colombia’s billionaire Santo Domingo family.

AB-InBev’s approach initially split the two big shareholders. Altria, with a 27 percent stake, told SABMiller to enter talks last week but the Santo Domingos, with 14 percent of the shares, sided with the board in rejecting AB-InBev’s earlier approaches.

In the end, the Santo Domingos’ stubbornness paid off handsomely as it forced AB-InBev to increase its offer from GBP 42.15 per share to GBP 44.00.

The GBP 44 cash offer represents a premium of about 50 percent over SABMiller’s share price in mid-September, before the bid battle started.

In a high-suspense poker game last week, tempers were rising on both sides because under UK takeover rules AB-InBev had until 5pm tomorrow to lodge a formal bid or walk away.

SABMiller has now asked the takeover panel for an extended deadline so the two firms can work out the details. The new deadline for AB-InBev to make a firm offer is 28 October 2015.

According to media reports, SABMiller has negotiated a USD 3 billion break fee payable by AB-InBev if the deal falls through because of competition hurdles or opposition by AB-InBev’s shareholders. The final deal still needs approval by AB-InBev’s board.

MegaBrew would create one of the world’s biggest consumer goods companies