SABMiller accepts new $106 billion AB InBev takeover offer

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AB InBev Raises Offer for SABMiller


SABMiller (SAB.L) accepted a takeover proposal at the fifth time of asking after Anheuser-Busch InBev (ABI.BR), the world's largest brewer, set out a cash-and-share package currently worth 69 billion pounds ($106 billion).

The deal to create a brewer making almost a third of the world's beer would rank in the top five mergers in corporate history and be the largest takeover of a UK company.

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After repeated rebuttals from its next largest rival, AB InBev said on Tuesday it was willing to pay 44 pounds in cash per SABMiller share, with a partial share alternative set at a discount and limited to 41 percent of SABMiller shares.

SABMiller said it had indicated to AB InBev that its board would be prepared to accept the offer and said it had asked for a two-week extension to the deadline set for its rival to announce a firm intention to bid. The new deadline is Oct. 28.

The new group would combine AB InBev's Budweiser, Stella Artois and Corona lagers with SABMiller's Peroni, Grolsch and Pilsner Urquell.

See photos of the merging beers:

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Anheiser-Busch InBev, SABMiller merger (Budweiser)
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SABMiller accepts new $106 billion AB InBev takeover offer
A barman opens a bottle of Peroni beer, brewed by SABMiller Plc, in The Capitol, a JD Wetherspoons Plc public house, in this arranged photograph in London, U.K., on Tuesday, Oct. 13, 2015. Anheuser-Busch InBev NV agreed to buy SABMiller Plc for almost 69 billion pounds ($106 billion) to clinch a record industry deal after several rejections, creating a brewer that will account for a third of all beer sales globally. Photographer: Simon Dawson/Bloomberg via Getty Images
FILE - In this Thursday, March 5, 2015 file photo, Budweiser beer cans at a concession stand at McKechnie Field in Bradenton, Florida, USA. Anheuser-Busch InBev, the owner of the worldâs biggest brewer Budweiser, on Wednesday Oct. 7, 2015, raised its takeover offer for rival SABMiller to more than 68 billion pounds ($104 billion), but the offer was rejected. (AP Photo/Gene J. Puskar, File)
NEW YORK, NY - OCTOBER 09: A bar tender pours a glass of Miller High Life beer at a bar on October 9, 2015 in New York City. Budweiser's parent company AB InBev is attempting to buy SABMiller. (Photo by Andrew Burton/Getty Images)
NEW YORK, NY - OCTOBER 09: In this photo illustration, Bud Light beer and Miller High Life beer are sold in a grocery store on October 9, 2015 in New York City. Budweiser's parent company AB InBev is attempting to buy SABMiller. (Photo by Andrew Burton/Getty Images)
Bottles of Budweiser beer, brewed by Anheuser-Busch InBev NV, and bottles of Peroni beer, brewed by SABMiller Plc, sit in an ice bucket in The Capitol, a JD Wetherspoons Plc public house, in this arranged photograph in London, U.K., on Tuesday, Oct. 13, 2015. Anheuser-Busch InBev NV agreed to buy SABMiller Plc for almost 69 billion pounds ($106 billion) to clinch a record industry deal after several rejections, creating a brewer that will account for a third of all beer sales globally. Photographer: Simon Dawson/Bloomberg via Getty Images
A glass of Castle brand beer, a SABMiller Plc drinks brand, sits in a bar in Johannesburg, South Africa, on Wednesday, Sept. 30, 2015. Anheuser-Busch InBev NV is lining up banks including Bank of America Corp. and Banco Santander SA to arrange as much as $70 billion in financing as it prepares to make a takeover proposal for SABMiller Plc, according to people familiar with the matter. Photographer: Kevin Sutherland/Bloomberg via Getty Images
Coors beers are seen on display at JJ&F Market in in Palo Alto, Calif., Monday, Feb. 9, 2009. Molson Coors Brewing and SABMiller said Tuesday fourth-quarter profit for their joint venture MillerCoors declined 40 percent mainly due to hefty impairment charges related to its Sparks brand and costs to integrate the two companies' beer brands in the U.S. (AP Photo/Paul Sakuma)
An employee restocks shelves with Castle brand beer, produced by SABMiller Plc, at a Durban City Bottle store in Durban, South Africa, on Monday, Oct. 12, 2015. Anheuser-Busch InBev NV has discussed raising its takeover bid for SABMiller Plc to about 43 pounds ($66) a share, a level that leaves the two sides at odds days before a deadline for a formal offer, people familiar with the discussions said. Photographer: Kevin Sutherland/Bloomberg via Getty Images
Bottles of Anheuser-Busch InBev NV Budweiser brand beer, right, are arranged for a photograph in a cooler alongside SABMiller Miller brand beer in Tiskilwa, Illinois, U.S., on Wednesday, Sept. 16, 2015. Anheuser-Busch InBev NV said it intends to make an offer for SABMiller Plc to unite the world's two biggest beermakers with brands including Budweiser and Peroni and create a company that would control about half the industry's profit. Photographer: Daniel Acker/Bloomberg via Getty Images
NEW YORK, NY - OCTOBER 09: In this photo illustration a Budweiser beer and Miller High Life beer sit at a bar on October 9, 2015 in New York City. Budweiser's parent company AB InBev is attempting to buy SABMiller. (Photo by Andrew Burton/Getty Images)
Bottle of Carling Black Label, Hansa and Castle beer, brewed by SABMiller Plc, sit for sale at a bottle store in Johannesburg, South Africa, on Thursday, Oct. 1, 2015. Anheuser-Busch InBev NV is lining up banks including Bank of America Corp. and Banco Santander SA to arrange as much as $70 billion in financing as it prepares to make a takeover proposal for SABMiller Plc, according to people familiar with the matter. Photographer: Kevin Sutherland/Bloomberg via Getty Images
In this March 11, 2015 photo, newly-filled and sealed cans of Miller Lite beer move along on a conveyor belt, at the MillerCoors Brewery, in Golden, Colo. SABMiller, the worldâs second-largest brewer, sells beers including Miller Lite, Coors Light and Blue Moon in the U.S. and Puerto Rico through a joint venture with Molson Coors. (AP Photo/Brennan Linsley)
NEW YORK, NY - OCTOBER 09: A bar tender pours a glass of Miller High Life beer at a bar on October 9, 2015 in New York City. Budweiser's parent company AB InBev is attempting to buy SABMiller. (Photo by Andrew Burton/Getty Images)
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AB InBev would add certain Latin American and Asian breweries to its already large presence and, crucially, see it enter Africa for the first time.

The parties have agreed that AB InBev would pay a break fee of $3 billion to SABMiller in the event the transaction fails due to the significant regulatory issues or because AB InBev shareholders do not back it.

The new offer unveiled on Tuesday surpasses a Monday proposal set at 43.50 pounds in cash and is 50 percent above SABMiller's shares on Sept 14, the day before speculation surfaced about an impending AB InBev approach.

The partial share alternative remains, designed for SABMiller's two main shareholders, cigarette-maker Altria (MO.N) and the BevCo company of Colombia's Santo Domingo family, who own 40.5 percent of the UK-based brewer.

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Were they to accept the discounted alternative and all other shareholders took cash, the offer would be worth 69 billion pounds at current prices.

"There's so much we don't know – we don't know what costs they'll take out, we don't know what they'll get for the asset sales that they'll have to make. But if you make reasonable assumptions about those, I think it's a pretty good price all around," said Morningstar analyst Phil Gorham.

LURED BY AFRICAN GROWTH

Africa is expected to see a sharp jump in the legal drinking age population in coming years and a fast-growing middle class more willing to switch to lagers and ales from illegal brews.

In western Europe and North America beer volumes have steadily declined in the past two decades and U.S. consumers in particular have shifted to craft brews made by small players.

For many observers this would be the final chapter of consolidation in brewing. The big four, AB InBev, SABMiller, Heineken (HEIN.AS) and Carlsberg (CARLb.CO), are already present across the globe and brewing more than half of the world's beer.

Antitrust issues would likely lead to sales of assets in the United States and China and impact soda makers and bottlers. SABMiller has deals with Coca-Cola (KO.N) and AB InBev ties with PepsiCo (PEP.N).

AB InBev, partly controlled by 3G Capital, a private equity fund run by a group of Brazilian investors, said it had agreed that SABMiller shareholders would still be entitled to dividends up to a certain level for the year ending in March 2016.

AB InBev still needs to secure support from Altria, which backed a lower offer last week, and BevCo, which rejected that 42.15 pound cash proposal.

The agreement with SABMiller marks a further success for 3G, after previously orchestrated takeovers of Burger King, ketchup maker Heinz (KHC.O) and Kraft Foods. However, AB InBev, known for cost-cutting prowess, will have to be as sharp as possible to ensure the deal makes financial sense.

AB InBev has previously said it should not have any trouble funding the transaction, with a net debt to core profit (EBITDA) set to fall to a comfortable two times next year. Banking sources say it is already lining up $70 billion of debt financing.

($1 = 0.6511 pounds)

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SABMiller accepts new $106 billion AB InBev takeover offer

10. Coors Light (U.S.)

(Photographer: Chris Ratcliffe/Bloomberg via Getty Images)

9. Brahma (Brazil)

(© Clynt Garnham  Food & Drink / Alamy)

8. Harbin (China)

(© My Favourite Lens / Alamy)

7. Heineken (Netherlands)

(Shutterstock)

6. Yanjing (China)

(Mr Bao 包先生/Flickr)

5. Skol (Brazil)

(Shutterstock)

4. Budweiser (U.S.)

(AP Photo/Gene J. Puskar)

3. Bud Light (U.S.

(AP Photo/Gene Puskar)

2. Tsingtao (China)

(PSL Images / Alamy)

1. Snow (China)

Photographer: Doug Kanter/Bloomberg via Getty Images

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