Miller Brewing to welcome SAB in £3.5bn agreed takeover

South African Breweries is today expected to unveil a $5bn (£3.5bn) takeover of Miller Brewing of the US alongside its full-year results. Barring last-minute hitches, the transforming deal will be funded with a mix of cash and shares that will see Miller's owner, the US tobacco giant Philip Morris, own up to one-third of SAB.

The market has welcomed SAB's decision to swap its emerging market exposure for the world's number two spot, sending the shares more than 20 per cent higher since details of the deal first emerged.

SAB, which brews Castle and Pilsner Urquell lagers, is expected to part-finance the deal by issuing $3bn of new shares, which will give Philip Morris a stake of between 25 per cent and 33 per cent in the London and Johannesburg-listed group. The remaining $2bn will be debt financed.

SAB, which has been locked in talks with Philip Morris for much of the year, would be transformed into a global business by the acquisition, with interests spanning the US, Honduras, El Salvador, Russia, China, sub-Saharan Africa and eastern Europe.

However, SAB's move into a mature market with declining beer sales and intense competition from the world's number one Anheuser-Busch, the brewer of Budweiser, has divided analysts.

One South African-based analyst said: "It is a huge, huge risk. The odds are quite high that it will be a difficult situation." Others consider the growth prospects unexciting.

SAB's challenge will be to succeed where Philip Morris has failed and turn around Miller, which has underperformed for the past decade, losing market share to Anheuser-Busch. Analysts see few synergies or cost savings, making the $5bn price tag look expensive.

The main benefit will be to reduce SAB's exposure to the South African rand, which has blighted the group's profitability as it has depreciated against the US dollar by more than 30 per cent. The deal is expected to reduce its reliance on rand-denominated earnings from South African beer sales from 54 per cent of group turnover to 32 per cent. Owning the US brewer would also give SAB scope to distribute its own heavier tasting beers through Miller's US network, while increasing global sales of Miller.

The deal represents something of a U-turn for SAB, which since listing in London in 1999 has resisted pressure to find a mature market acquisition.

SAB, which is run by the chief executive Graham Mackay, will reveal today what form its relationship with Philip Morris will take. Analysts see any stake that Philip Morris receives as a potential overhang. SAB's shares closed up 5.5p at 576p.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

Reach Volunteering: Trustees with Finance, Fundraising and IT skills

Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent