ab inbev said to be readying us106 billion bid for sab miller 1425822015

Sunday Times: The offer may come through as early as Monday

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By :  ,  Financial Analyst

The Sunday Times reported yesterday (September 27) that Anheuser Busch Inbev SA (EBR:ABI) and SABMiller plc (LON:SAB) have begun friendly merger talks in recent days, and that AB Inbev could launch a mammoth £70 billion (SG$152 billion) takeover bid as early as Monday.

If that happens, the transaction would mark the biggest ever acquisition ever of a British company, and join the two largest brewers of the world, creating a £177 billion brewing giant boasting of timeless brands such as Stella Artois, Foster’s and Corona.

According to sources, target SABMiller was receptive to the offer but was negotiating hard regarding the price, the Sunday Times said.

The merged giant would dominate the fast growing markets in Latin America and Africa, combine their brewing operations across Asia and likely control nearly a third of the global beer market.

According to the New York Times, the biggest attraction for AB InBev is SABMiller’s business in Africa which generated 28 per cent of the latter’s revenue and 30 per cent of its EBITDA (earnings before interest, taxes, depreciation and amortization) last year. Together with partner Castel, SABMiller controls over half of Africa’s official beer market, the NYT said.

An important player in the deal could be tobacco giant Altria Group Inc (NYSE:MO), which owns a 27 per cent chunk of SABMiller, and has three seats on SABMiller’s 16-director board. Altria is SABMiller’s largest shareholder.

According to the Wall Street Journal, Altria would likely demand enough post-deal equity and board representation in the merged company to be able to maintain its existing profit streams and earnings growth – crucial to offset shrinking volumes in its cigarettes business.

AB InBev, which has a 200-strong portfolio of brands, including Budweiser, approached SABMiller earlier this month with a takeover proposal.

The huge acquisition price may entail a record-sized issue of debt by AB InBev, according to asset manager BlackRock, Inc. (NYSE:BLK) – one that could put in the shade Verizon’s massive US$49 billion (SG$70 billion) bond float in 2013 for the US$130 billion acquisition of its wireless arm.

AB InBev has until October 14 to make a formal buyout offer.

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