SABMiller Agrees In Principle To Merger With Anheuser-Busch InBev

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Next it's Budweiser-Corona-Stella-Miller time. The world's two largest brewers disclosed merger plans today. If shareholders and regulators say yes, the new conglomerate will control about a third of the world's beer supply. Here in the U.S., it would be about half of the market. NPR's Yuki Noguchi reports on what's driving the deal.

YUKI NOGUCHI, BYLINE: Valued at more than $104 billion, this is the biggest beer deal to come about since 2008, when St. Louis-based Anheuser-Busch sold itself to the Belgian-Brazilian company InBev, itself the result of a megamerger that happened four years before that. In a video message, Carlos Brito, the CEO of AB InBev, positioned the new merger this way.

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CARLOS BRITO: Together, we have better growth prospects and an appealing mix of global and local brands that consumers love.

NOGUCHI: In fact, these beer conglomerates face a problem - beer sales are flat. In the U.S., the biggest beer brands that both companies represent - Bud, Michelob, Miller and Coors, to name just a few - are losing ground to a growing movement in craft beers. Nick Petrillo is an analyst with market research firm IbisWorld.

NICK PETRILLO: Basically what's driving this merger is the fact that the industry, as it stands right now, is not growing fast at all. And in some areas, per capita expenditure on alcohol is actually declining.

NOGUCHI: Petrillo says that's especially true where AB InBev is already strong, and the two companies actually have very little geographic overlap. To the extent that they do, it's in distribution networks in the U.S. He says SABMiller will probably have to divest its ownership in the joint venture MillerCoors in order to close the deal.

PETRILLO: These two companies look at it as really their only option for insuring that they can continue to have high margins, steady revenue growth and continual success over the next five years, 10 years.

NOGUCHI: HSBC's global beverage analyst, Carlos Laboy, agrees.

CARLOS LABOY: SABMiller brings in a fantastic footprint in Africa and some great growth markets with low per capita consumption in Latin America, specifically in Colombia, Central America and Peru.

NOGUCHI: Laboy says he expects antitrust regulators to approve the deal, but with some concessions.

LABOY: In the case of China, it's unclear whether regulators in China would allow Anheuser-Busch InBev to hold onto its minority equity stake in a joint venture with China resources for Snow beer, the largest brand in the world.

NOGUCHI: One of the biggest implications, he says, is actually for non-beer companies, which Laboy sees as AB InBev's next target in the beverage merger boom.

LABOY: We believe that ABI will have paid down its debt sufficiently in the next three or four years to then potentially turn its sights on the Coca-Cola Company.

NOGUCHI: SABMiller shareholders have to approve the deal. AB InBev agreed to pay a $3 billion breakup fee if the deal falls through. Yuki Noguchi, NPR News, Washington. Transcript provided by NPR, Copyright NPR.