Reports AB InBev will buy SABMiller

Reports are circulating that brewing giant AB InBev will buy SABMiller in what amounts to an $80 billion deal. We the deal to go through it would create a group brewing a third of the world’s beer.

According to Reuters:

Analysts and bankers suggest 2013 as a likely time frame for a takeover that is seen as the final play in deal making in big world brewing.

They say the world’s No 1 brewer AB InBev will not be deterred from making a move for SABMiller even after the No 2 brewer swallows up Australia’s Foster’s by the end of 2011 in a $10.2 billion deal.

A Foster’s deal may delay an AB InBev-SABMiller linkup by six to twelve months pushing a possible deal to 2013, after AB InBev’s Chief Executive Carlos Brito said its debt would fall during 2012 to levels which made further acquisitions possible.

A deal would close out a decade of rapid consolidation led largely by AB InBev and SABMiller and leave few remaining easy targets, with the remaining big global brewers like Heineken and Carlsberg, as well as AB InBev, controlled by families, individuals or charity shareholders.

“The Foster’s deal may delay an AB InBev-SABMiller tie up, but it doesn’t change the strategic view that eventually it will make sense for these two to link up,” said one banker who has worked for one of the big brewers.

AB InBev’s Brito is said to like the high-margin Australian beer market and although a Foster’s deal will add to the cost of an eventual SABMiller takeover, it would give a combined group an even wider spread of the world’s beer market.

A deal would link AB InBev’s Budweiser, Stella Artois and Brahma beer brands with SABMiller’s Peroni, Miller Lite and Grolsch, and cause only major anti-trust headaches in the U.S. and China which would force sell-offs in those markets.

AB InBev swallowed Budweiser-brewer Anheuser-Busch for $52 billion in 2008 in the world’s biggest ever cash takeover, and due to big cost savings, sell-offs and hefty cash generation has cut its debt to be able to start thinking about its next move.

SABMiller is attractive to AB InBev due to the London-listed brewer’s large operations in the high-growth emerging markets of Africa, South America and eastern Europe which will help AB InBev reduce its reliance on the tough U.S. beer market

“Over 90 percent of AB InBev’s earnings come from America, so a move for SABMiller would create a real powerhouse with big operations on six continents,” said another banker.

In order to deal with anti-trust issues the new company would SABMiller’s 58 percent stake in U.S. brewer MillerCoors, probably to 42 percent co-owner Molson Coors, for around $9 billion. A further move would likely be the sale of SABMiller’s 49 percent share in leading Chinese brewer CR Snow, to appease Chinese authorities as AB InBev already has a significant Chinese presence.