October 13, 2015

After weeks of negotiations, SABMiller’s board has agreed to the key points of the latest enhanced potential takeover offer from AB InBev NV that would value the group at $104.2 billion. The agreement lays out a path for the formation of the world’s most massive brewer that would control most of the world’s beer markets.

SABMiller’s board has unanimously agreed to recommend to its shareholders to accept AB InBev’s offer of £44 per share, indicating a 50% premium to its share price on September 14. In exchange for 41% of stock, AB InBev is offering a combination of cash and unlisted stock with a five year lock up period, translating into a real price of £39.03.

Talks took a turn on Sunday October 11 when AB InBev chief executive, Carlos Brito, sent a note to SABMiller asking for a meeting Monday morning. After a day of consistent meetings, a deal was reach between the two boards late Monday evening.

Moving forward, AB InBev now faces gaining regulatory approval for such a deal, which, considering its size and scope, could take a year to achieve. The most concerning regulatory issues will likely be faced in the U.S. where AB InBev currently holds 45% of the market and SABMiller holds 25% through its MillerCoors LLC joint venture with Molson Coors Brewing Co., and where AB InBev is currently being investigated by the Justice Department regarding its recent acquisition of tow California distributors. A second hurdle will be faced in China where AB InBev holds 14% of the market as of last year according to Euromonitor. Future divestiture requirements are being predicted with Chinese authorities likely to force AB InBev to exit SABMiller’s joint venture with China Resources Enterprises Inc., which controls 23% of the market and sells the top selling Snow brand products.

Venturing off the usual path, the latest offering by AB InBev differs from its prior offers by including a clause for SABMiller shareholders to receive dividend payments during the time period before the deal closes, an action not usually taken during such deals, and one which will increase the amount SABMiller’s shareholders get by $1.3 billion.