AB InBev, SABMiller formalize $106 billion deal

Anheuser-Busch InBev NV on Wednesday said it had formally agreed to buy SABMiller PLC for £69.8 billion ($105.5 billion), a deal that creates a brewing behemoth that will sell roughly one in three beers world-wide.

As part of that deal, SABMiller has agreed to sell its 58 percent share in the Miller Coors LLC joint venture to its partner, Molson Coors Brewing Co., which holds the remaining stake, as well as the Miller portfolio outside the U.S. for $12 billion.

The divestiture, which is contingent on the completion of AB InBev’s acquisition of SABMiller, would catapult Molson to the number two position in the United States, with a 25 percent market share second only to AB InBev’s 45 percent share.

The sale of Miller Coors—which sells brands including Miller Lite, Miller High Life and Blue Moon—was widely expected, and is seen as necessary for AB InBev to gain U.S. regulatory approval to buy SABMiller.

AB InBev plans to seek to have its shares listed on the Johannesburg Stock Exchange soon after Wednesday’s announcement. The combined company’s ordinary shares will be listed in Brussels, Johannesburg and Mexico. The American depositary shares will be listed in New York.

AB InBev said it expects to achieve at least $1.4 billion in pre-tax cost savings a year by the end of the fourth year after the deal is completed.

“By pooling our resources we would build one of the world’s leading consumer-products companies,” said AB InBev Chief Executive Carlos Brito. “Our joint portfolio of complementary global and local brands would provide more choices for beer drinkers in new and existing markets around the world.”

A tie-up between the two beer companies, if it gets the green light from regulators, would bring AB InBev brands such as Budweiser, Corona and Stella Artois together with SABMiller’s Grolsch and Peroni, and give the combined company a major presence in the U.S., China, Europe, Africa and Latin America. Together, AB InBev and SABMiller sell more than 30 percent of the world’s beer.

Exane BNP Paribas analyst Eamonn Ferry has said the combined company would be the world’s largest consumer staples by earnings before interest, taxes, depreciation and amortization and the third largest by sales, behind Procter & Gamble Co. And Nestle SA. He estimates 2016 sales of $58 billion and Ebitda of $23 billion, including synergies.

The formal offer by AB InBev comes after weeks of back and forth between the two companies. SABMiller’s board announced Oct. 13 that it had agreed in principle to unanimously recommend to its shareholders AB InBev’s proposal to pay £44 a share to buy the London-based brewer, marking a 50 percent premium to its share price on Sept. 14, the day before media speculation about a potential deal emerged.