A-B InBev, SABMiller Finalize Merger Agreement

CEO Stresses No Significant Savings Will Come From Sales, Marketing Investments

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Anheuser-Busch InBev on Wednesday announced the final terms of its $107 billion takeover of SABMiller, creating what executives called the "first truly global beer company" with roughly 30% share of the international beer market. The deal is expected to close in the second half of 2016.

As has been widely expected, Molson Coors will assume total control of the MillerCoors joint venture in the U.S. in order to ease anti-trust concerns. Molson Coors will buy SABMiller's 58% stake in MillerCoors for $12 billion and also gain rights to the Miller brand portfolio globally. The deal is conditioned upon the closure of the AB InBev-SABMiller deal.

The competitive landscape in the U.S. will largely remain the same, with A-B InBev controlling big brands like Budweiser and Bud Light, while Molson Coors owns brands including Coors Light and Miller Lite. "It's business as usual for MillerCoors and we're working hard to deliver against our 2015 plans," MillerCoors said in a statement. "MillerCoors leaders and their teams are laser-focused on the company's objective to get back to annual volume growth across the portfolio."

But the end result is that Molson Coors becomes a bigger player in the U.S. and globally.

Molson Coors CEO Mark Hunter in a statement called the transaction a "game-changing opportunity." He added that "MillerCoors is a business we know very well -- its strategy, culture, brands and people -- and we look forward to meeting and exceeding the needs of our valued distributor partners and consumers across the U.S. In consolidating ownership of MillerCoors, we will strengthen our presence in the highly attractive U.S. beer market, further improve our global scale and agility, benefit from significantly enhanced cash flows, and capture substantial operational synergies."

A-B InBev first approached SABMiller's board about a deal in mid-September, setting off several rounds of brinksmanship in which SABMiller rejected lower-valued offers. Under the final deal, A-B InBev will pay 44 pounds per share, or roughly $67 per share, for SABMiller stock, which represents a 50% premium over SABMiller's Sept. 14 closing stock price.

"We are excited about our agreement on the terms of a recommended acquisition of SABMiller to build the world's first truly global brewer," AB InBev CEO Carlos Brito said in a statement. "We believe this combination will generate significant growth opportunities and create enhanced value to the benefit of all stakeholders. By pooling our resources, we would build one of the world's leading consumer products companies, benefitting from the experience, commitment and drive of our combined global talent base."

The brewer expects to squeeze out synergies over four years, peaking at $1.4 billion annually by year four. On a call with investment analysts, Mr. Brito stressed that no significant savings would come from sales and marketing investments. Rather, the brewer expects to save money in areas including procurement and engineering, as well as brewery and distribution efficiencies.

Globally, A-B InBev has strong brand share in North America and South America, while SABMiller has a major presence in Africa. The newly merged company will make Africa a priority, Mr. Brito said, noting that the continent's growing middle class has helped fuel beer volume growth at a rate three times faster than the rest of the world.

The two companies have employed much different marketing strategies. A-B InBev has focused on building big global brands such as Budweiser and Corona, which it owns outside the U.S. SABMiller has put more emphasis on growing regional and local brands.

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