Intrigue surrounding the future of South African Breweries and Mller Brewing of the US has once more erupted with reports in today's Wall Street Journal that SAB is in exclusive negotiations to acquire Miller Brewing Co. from Philip Morris Cos. for about US$5 billion.

The Wall Street Journal reports that people familiar with the matter said the discussions between the two concerns are at an advanced stage and they hope to finalise terms in the next few weeks.

The deal would create the world's second largest brewer, behind Budweiser owner Anheuser-Busch. It would have a firm footing I nthe lucrative US market as well as strong growth potential from SAB's emerging markets business.

However, the sources warned that the deal was complicated and still had a chance of falling through. "There's still quite a bit to be done before this deal gets done," this person told the Wall Street Journal.

SAB declined to comment on the Miller talks, as did Philip Morris.

Under the terms of the deal being discussed, Philip Morris would own roughly a fourth of SAB and would agree not to sell its stake for some time, the paper reported.

Philip Morris wants about US$2 billion of the roughly US$5 billion sale price to be in cash, but would not take the money directly because it wants to minimize taxes, the paper reported.
Instead, SAB would assume US$2 billion in debt that Philip Morris plans to allocate to Miller, allowing $2 billion in debt to be removed from the consumer product giant's balance sheet, the Journal said. 
 The news has met with quiet consent from analysts. Stuart Price of investment bank West LB Panmure said: "The deal…represents a rare opportunity for SAB to gain citical mass in a mature market without overpaying…If the deal goes ahead we believe   it would reduce SAB's exposure to the Rand [and] lower it's cost of capital." 

But he warned: "Synergies are limited: SAB has no/little US exposure but it would give SAB the opportunity to distribute its Czech beer brand more effectively in the USA. SAB brews Miller under licence in Russia."