Miller rumors heat up

Sale could be announced within weeks: Wall Street Journal

Apr 3, 2002 - A report in the Wall Street Journal has sparked new speculation that South African Brewers could be on the verge of buying Miller Brewing Co. from Philip Morris.


Neither Philip Morris nor SAB would comment officially on the latest rumors. Privately, SAB officials told The Guardian in London that the speculation was from underworked investment bankers just "twiddling their thumbs."

The WSJ story characterized discussions as being in an "advanced stage." It also noted that the financial negotiations are complex, so the deal could be announced within weeks or fall through before that.

A merger of Miller and SAB would create the world's second-biggest brewer, behind only Anheuser-Busch of St. Louis.

SAB, best known in the West for owning the upscale Czech Pilsner Urquell brand, is the largest beer maker in the developing world, with growing businesses in China, Poland and Honduras. But SAB believes that it can't be a global beer player without a significant presence in the U.S. market, where Miller is a distant second behind A-B.

Despite it problems, Miller still has better profit margins than those in the developing world and would give SAB a well-known brand to sell internationally. A key for SAB would be earning income in dollars because the value of the rand, South Africa's currency, continues to erode.

The value of the rand and the tax implications for Philip Morris are just two of the financial obstacles that could hang up the sale. The deal has been valued at $5 billion and would be a combination of stock and cash.

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