UK/US: SAB unveils $5.6 billion acquisition of Miller
South African Breweries (SAB) is to buy Miller Brewing from owner Philip Morris to create the world's second largest beer group behind Anheuser Busch, for US$5.6 billion.
The new concern will be called SABMiller and will have lager volume sin excess of 120m hectoliters, while for the 12 months to 31 March 2002 pro forma adjusted EBITDA for the combined entity is US$1.5 billion.
The deal is expected to close in July, pending regulatory approval, said Miller parent company Philip Morris Cos.
"SABMiller will immediately become the world's second-largest brewer, with arguably the best geographic footprint among all global brewers," Philip Morris chief executive Louis Camilleri said in a statement.
London-based South African Breweries, SAB is paying US$3.6 billion in shares to Miller's owner, Philip Morris, and taking on Miller debt of US$2 billion. The deal will give US Marlboro cigarette and Kraft food group Philip Morris a 36% economic interest in SABMiller.
The group will be headquartered in London but will continue operating Miller's seven US breweries.
Graham Mackay, SAB CEO, said: "This transaction represents a new chapter in our development, taking SABMiller to the number tow position globally, and positioning us to be a major participant in the ongoing consolidation of the global beer industry. The transaction will provide access for SAB to a significant position in the US market, which enjoys the brewing industry's largest profit pool. Furthermore it will enhance SAB's international brand portfolio."
The deal will be earnings enhancing in year one, pre-goodwill amortisation and before synergies, and is expected to deliver annual cost synergies of US$50m by the end of year three, SAB said.
But some analysts have signaled that they believe SAB may have overpaid, with many expecting it to pay only US$5 billion. However Stuart Price beverage analyst with WestLB Panmure said: "The bears will point out that SAB has seeming over-paid for an under-performing US business. However, these same bears have criticized SAB for its focus on emerging markets - they cannot have it both ways. Miller reduces the EBIT exposure to South Africa from 51% to 33%; it also gives SAB a similar country risk profile to Carlsberg and Interbrew.
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