Inbew and SABMiller agree to merger terms

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The world's two biggest brewers agreed on Tuesday to create a company making almost a third of the world's beer after SABMiller (SAB.L) accepted an offer worth more than $100 billion from larger rival Anheuser-Busch InBev (ABI.BR).

The SABMiller board said it would give its blessing to a fifth proposal from its sole larger rival. If it goes through, the deal would rank in the top five mergers in corporate history and be the largest takeover of a UK company.

After repeated rejections to its lower proposals, AB InBev said on Tuesday it was willing to pay 44 pounds in cash per SABMiller share, with an alternative for cash and shares set at a discount and limited to 41 percent of SABMiller shares.

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There are significant antitrust hurdles to any combination, particularly in the United States, where the companies would have about 70 percent of the beer market.

A deal would likely result in Denver-based Molson Coors (TAP.N) acquiring SABMiller's 58 percent stake in their U.S. joint venture.

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Any merged group may also have to sell interests in China, where SABMiller's CR Snow joint venture with China Resources Enterprise (0291.HK) is the market leader.

It would also force change in the wider beverage sector, with SABMiller a large distributor of Coca Cola (KO.N) while AB InBev has ties with rival PepsiCo (PEP.N).

Bernstein Research beverage analyst Trevor Stirling said that he rated the chances of the deal going through at 80 percent, with antitrust issues being the main risk.

"There is a chance that due diligence throws up something nasty," he said, but added that SABMiller would be unlikely to have accepted AB InBev's approach if they knew of a major problem.

Morningstar's Gorham said that, of remaining assets, the beer business of Guinness and spirits maker Diageo (DGE.L) looked particularly attractive, with Heineken a possible buyer.

Carlsberg's new management is likely to have its hands full with sorting out problems in Russia for some time.

"With all the major M&A targets now taken, and M&A so important to brewers’ growth, it raises the question of where next for global brewers as they bid to carry on growing," said Jeremy Cunnington, a drinks analyst at Euromonitor International.

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