Sabmiller agrees AB Inbev takeover deal

Lesotho Times - - Business -

JO­HAN­NES­BURG — The world’s two big­gest beer pro­duc­ers are set to merge af­ter Sabmiller ac­cepted an in­creased takeover of­fer from ri­val An­heuser-busch Inbev.

Sabmiller said it had agreed “in prin­ci­ple” a £44-a-share of­fer, af­ter four pre­vi­ous at­tempts from AB Inbev.

AB Inbev’s brands in­clude Bud­weiser, Stella Ar­tois and Corona, while Sabmiller pro­duces Peroni and Grolsch.

If the deal, worth about £70 bil­lion, goes ahead, the newly-cre­ated firm will make about 30 per­cent of the world’s beer.

Sabmiller has a work­force of close to 70 000 peo­ple in more than 80 coun­tries, and global an­nual sales of more than $26 bil­lion. AB Inbev has a work­force of 155 000 and global rev­enues of more than $47 bil­lion.

AB Inbev had made four pre­vi­ous bid ap­proaches for Sabmiller - at £38, £40, £42.15, and £43.50 per share - but they had been re­jected by Sabmiller, which ar­gued they un­der­val­ued the com­pany.

In a state­ment, the boards of the two firms said they had now “reached agree­ment in prin­ci­ple on the key terms of a pos­si­ble rec­om­mended of­fer”.

The two com­pa­nies have not yet for­mally fi­nalised the terms of an of­fer, but the lat­est de­vel­op­ment means they have ex­tended the City dead­line for a firm of­fer un­til 28 Oc­to­ber.

Sabmiller’s African brands are ac­tu­ally one of the main rea­sons AB Inbev is so thirsty for this merger. Car­los Brito, the chief ex­ec­u­tive of AB Inbev, has said that Africa is a “key piece” of the deal.

Sabmiller, of course, has its roots in Africa - South African Brew­eries was founded around the time of gold rush in Jo­han­nes­burg in the late 19th Cen­tury. As it stands, and if this deal goes through, it would mean that the merged en­tity would con­trol 31 per­cent of global beer sales.

AB Inbev’s brands are largely con­cen­trated in the Amer­i­cas and Europe; SABMILLER has about 40 brands in Africa. It was the growth of Sabmiller’s African brands that re­ally at­tracted AB Inbev.

What makes th­ese brands so tasty is the grow­ing African mid­dle class, an army of con- sumers that all the ma­jor brew­ing com­pa­nies have been eye­ing up in re­cent years. As African beer drinkers have be­come more pros­per­ous over the past 20 years, they have moved out of the in­for­mal home-brew­ing mar­ket and started to buy branded beer.

Mean­while, South Africa’s rand gained against the dol­lar on Wed­nes­day, boosted by en­thu­si­asm over the po­ten­tial sale of brewer Sabmiller, a deal which could in­ject as much as R7 bil­lion into the econ­omy, an­a­lysts say.

The Na­tional Trea­sury has, how­ever, said it could try to stop the deal if it leads to ero­sion of the tax base.

“Mar­kets will keenly fol­low de­vel­op­ments in what could be one of the largest ac­qui­si­tions in cor­po­rate his­tory but news head­lines are purely in­struc­tive at this stage and will im­pact the rand once the deal has been inked,” Rand Mer­chant Bank cur­rency an­a­lyst John Cairns said.

The rand’s gains also partly re­flected a wob­bly dol­lar as in­vestors bet that the US Fed­eral Re­serve will have to wait longer be­fore any pol­icy tight­en­ing. — Bbc/reuters

Sabmiller’s African brands were the main at­trac­tions for AB Inbev.

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