UK-based brewing conglomerate, South African Breweries (SAB), has confirmed that it is in talks with US food, drinks and tobacco group, Philip Morris, regarding the acquisition of Miller Brewing. However, SAB said the discussions were "at a preliminary stage and no conclusions have been reached."

Miller Brewing is valued at around $5 billion but the current negotiations are thought to involve Philip Morris taking a substantial shareholding in a merged SAB-Miller group.

The merger of Miller and SAB would create the world's second-largest brewer, a heavyweight player that could compete with the world's biggest brewer, Anheuser-Busch, and other global brewing forces like Interbrew and Heineken. SAB owns the Pilsner Urquell brand, has 95% of the South African beer market and operations in China, Poland and Honduras.

Analysts have generally welcomed the idea of SAB merging with Miller. Investment Bank WestLB Panmure said that after such a merger, SAB would be deriving 30% of its EBIT from South Africa, as against the current 50%, reducing its exposure to emerging markets and the Rand.