The boards of AB InBev and SABMiller on Oct. 13 announced an agreement in principle on a "possible recommended offer" by AB InBev to acquire SABMiller for about $104 billion.
A deal, if completed, would merge what already are the world’s two largest brewers. The combined company would have annual sales of about $70 billion, more than three times that of closest rival Heineken, and hold 30 percent of global beer sales. But that's without possible required divestitures.
Under the terms of the "possible offer" (that's how the news release was carefully worded) SABMiller shareholders would receive GBP 44.00 (British pounds, currently about $67.50) per share in cash, with a partial share alternative available for approximately 41 percent of the SABMiller shares.
The all-cash offer represents a premium of approximately 50 percent to SABMiller’s closing share price of GBP 29.34 on Sept. 14, the last business day before speculation arose of an approach from AB InBev.
The board of SABMiller, based in London, indicated to AB InBev that it would be prepared unanimously to recommend the offer.
The announcement noted AB InBev would use "best efforts" to obtain any regulatory clearances required before the transaction, but would pay SABMiller $3 billion if the transaction fails to close as a result of the failure to obtain regulatory clearances or the approval of AB InBev shareholders.
Despite all the financial details, the statement warned that there was no certainty that a formal offer will be made.
One of the biggest complications may be MillerCoors, the U.S.-only joint venture between SABMiller and Molson Coors of Canada. That entity might have to be dissolved or spun off to satisfy antitrust issues.
See also "Beer Merger Could Brew Up Behemoth" from Sept. 17.