Deals and IPOs

Molson sale paves way for AB InBev-SAB £68 billion deal

Scheherazade Daneshkhu and Arash Massoudi

Anheuser-Busch InBev is poised to announce on Wednesday that it has clinched a deal to buy SABMiller for £68 billion and sell the latter's majority stake in its US joint venture brewing business to Molson Coors of Canada.

The main deal would create the world's largest brewer, and the sale of the MillerCoors joint venture interest is seen as essential to help AB InBev win approval from US regulators for the SAB takeover. One person familiar with the negotiations said SAB would sell its 58 per cent stake for about $12 billion (£7.9 billion).

The joint venture sale could also help smooth the way with other regulators, notably in China, where the combination is also likely to run into antitrust scrutiny.

Bottles of SABMiller's Miller Lite and Anheuser-Busch InBev's Budweiser beer.
Getty Images

AB InBev is also expected to announce that it will extract just under $1.5 billion in synergies from combining UK and South African-listed SAB with its own operations — equivalent to 7 per cent of SAB's net sales, including associates and excluding MillerCoors, two people familiar with the talks said.

This is lower than that achieved in previous deals spearheaded by the three Brazilian dealmakers, led by Jorge Paulo Lemann, who have masterminded AB InBev's growth.

SAB's board has already agreed in principle to the offer, which includes a £44-per-share cash component as well as a share option aimed at SAB's two largest investors.

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Analysts have said SAB is a more efficiently run business than AB InBev's other recent deals, making it harder to extract savings.

InBev achieved synergies amounting to 18 per cent of Anheuser-Busch's sales when it bought the Budweiser brewer in 2008 and 21 per cent from Modelo, the Mexican brewer of Corona.

Molson Coors owns 42 per cent of the MillerCoors joint venture and has always been seen as the natural buyer for SABMiller's larger stake. The sale agreement will be conditional on AB InBev's managing to complete its acquisition of SAB.

AB InBev/SABMiller reach agreement in principle on key terms of offer

AB InBev's formal offer to pay £44 in cash for each SAB share — and a partial share offer for 41 per cent of the London-listed brewer's shares — is expected to come in just hours ahead of a deadline set for 5pm Wednesday by the UK's Takeover Panel.

The deadline was twice extended as AB InBev raced to complete the terms of its deal.

Molson Coors declined to comment.