When the deal closes, which AB InBev said Wednesday it expects to happen Oct. 10, the combined group will sell more than a quarter of all beers sold worldwide and be the fifth-largest consumer goods company.

For AB InBev, the maker of Budweiser, Corona and Stella Artois, it provides entry into Africa and large fast-growing Latin American markets such as Colombia and Peru.

AB InBev, whose Canadian holdings include Labatt Brewing and brands such as Alexander Keith’s and Kokanee, will also cut its revenue from mature markets North America and Europe, to 37 from 47 per cent.

AB InBev’s 79 billion-pound (C$135 billion) bid passed in a meeting at a London Park Lane hotel lasting less than half an hour, overseen by chairman Jan du Plessis, who fielded only two questions from shareholders.

It secured support representing 95.5 per cent of SABMiller share value, having needed at least 75 per cent to succeed.

In an earlier meeting in Brussels, AB InBev CEO Carlos Brito said the new entity would continue to be called Anheuser-Busch InBev, eschewing any corporate reference to SABMiller, founded 120 years ago in South Africa. The brewer had changed its name after transformative deals in the past, such as InBev’s 2008 takeover of Anheuser-Busch.

“They can call it what they wish. That’s the way life works and that’s fine,” du Plessis told reporters after the meeting. “It’s what it is.”

He added that AB InBev were paying “a full price.”

Not a given

The approval of SAB shareholders was widely expected, but not a given. Criticism of the takeover offer grew after a steep fall in sterling following Britain’s vote to leave the European Union made AB InBev’s cash offer less appealing.

Activist shareholders pressured SAB to seek a higher offer, prompting AB InBev to sweeten its bid in July.

SAB backed the higher offer, and its two largest shareholders, cigarette maker Altria Group and the Santo Domingo family of Colombia, who together control about 40 per cent of the shares, gave their support and did not vote on Wednesday. However, some prominent shareholders, including Aberdeen Asset Management, continued to oppose it.

“We are obviously disappointed with, but not surprised by, the result,” Aberdeen said in a statement, adding it felt the final price still “significantly undervalued” SABMiller.

Despite hedge funds piling into the stock over the summer in the hope of a higher offer, Thomson Reuters data showed just six hedge funds with a collective investment of US$211 million remained shareholders as the deal crossed the line.

The lion’s share of that, US$199 million, was held by New York-based Soroban Capital, with smaller positions held by HBK Investments, Platinum Capital Management, Elliott Management, Farallon Capital Management and Davidson Kempner Capital.

Cost-conscious AB InBev expects to extract at least US$1.4 billion in annual cost savings after four years, it said, in addition to the US$1.05 billion already announced by SABMiller. Given the company’s history of easily beating such targets, broker Jefferies sees it achieving US$3 billion in savings.

The new company will sell off joint venture stakes in the U.S. and China, to satisfy antitrust regulators, divest Peroni and Grolsch and kick off a sale process for SAB’s central and eastern European brands, estimated to be worth up to seven billion euros (C$10.3 billion).

The assets to be sold include SABMiller’s 58 per cent stake in U.S. brewing firm MillerCoors, plus the Miller brand portfolio outside the U.S.

Both are to go to SABMiller’s j.v. partner, Molson Coors, once AB InBev’s takeover closes next month. The U.S. Department of Justice approved the MillerCoors stake sale to Molson Coors in July.

MillerCoors has produced the two companies’ Miller and Coors beer brands, as well as brands such as Molson Canadian, Foster’s and Peroni, for sale in the U.S.

Competition in individual markets is not expected to change radically after the merger, as the SABMiller and AB InBev companies have little geographic overlap.

— Reporting for Reuters by Martinne Geller and Philip Blenkinsop; additional reporting by Simon Jessop in London. Includes files from AGCanada.com Network staff.

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The very local nature of lagers and ales, and the fact that a price war is seen as unlikely, mean global market leader Anheuser-Busch InBev’s imminent takeover of SABMiller, the world’s second-largest brewer, should not destroy the competition.

“It’s been rumoured for a long time, so it’s not like we haven’t had time to think about it,” Laurence Debroux, chief financial officer of world No. 3 Heineken, told a conference at the end of September.

Debroux said rival brewers should not underestimate the strength of the “animal” that AB InBev would become after the takeover, but beer battles are fought market-by-market rather than globally.

“If I look at our three main contributors today, Mexico, Nigeria and Vietnam, those are countries where we were competing with one or other of those two so the fact that they would get together doesn’t really change our position on those markets,” she said.

World No. 4 Carlsberg’s CEO, Cees ‘t Hart, also does not expect much impact in his company’s core markets, where the new brewing giant will have a limited presence.

AB InBev, the owner of Canada’s Labatt Brewing, has been clear in its strategy in the past decade: buy up competitors, strip out costs, push up prices at least in line with inflation, and try to persuade consumers to upgrade from cheaper brands to mainstream or premium alternatives.

At the top of the chain are the higher-priced and higher-margin international premium or “super-premium” brands, led by Heineken and followed by AB InBev’s Budweiser.

The quintessential U.S. lager has suffered at home, but made great strides in Brazil and China and is now drunk more outside than inside the U.S.

AB InBev’s takeover bid is set to be comfortably above US$100 billion and the need to recoup its investment means a beer price war is not expected.

AB InBev’s greater muscle may allow it to push its global brands harder in new emerging markets, notably in Africa, and it could ramp up investment, but brewing will remain a largely local business.

“Beer doesn’t travel that well over borders. It’s not like you’re selling Snickers bars all over the world,” said a banker.

In Mexico, Heineken’s Dos Equis and Tecate brands dominate the north and AB InBev’s Corona the centre and south, and both companies have enjoyed volume growth, higher prices and improved profit margins.

“There is a lot of growth around,” said Exane BNP Paribas analyst Eamonn Ferry, referring particularly to Africa. “There will be competition in pockets, but it’s good news for the industry’s profits.”

Not the end for consolidation

Observers have called the “megabrew” merger the end phase of consolidation in the brewing industry, with likely disposals required by antitrust authorities in the U.S. and China presenting growth opportunities for smaller players.

In each case though, there is a clear favourite to buy, with Molson Coors expected to take SABMiller’s 58 per cent stake in their MillerCoors U.S. joint venture, and China Resources Enterprise the remainder of the CR Snow Chinese brewing business.

However, Japanese brewers Asahi, Kirin and Suntory Holdings are interested in snapping up assets outside their saturated home market, sources have told Reuters.

Carlsberg has said it will look at buying any assets put up for sale, although the Danish brewer faces problems in Russia — tighter alcohol regulation and a slowing economy there — and might not have the financial muscle, even though a change in its charter two years ago gives it more scope to issue shares.

Heineken’s Debroux said her company did not see any “white spaces” which it felt the need to occupy, but one person familiar with the Dutch brewer’s thinking believed it would halt investments for now and look into raising money.

An AB InBev-SABMiller merger would give it the opportunity to operate breweries in the U.S., where it already sells imported Heineken and Mexican brands. Last month it bought a 50 per cent stake in U.S. craft brewer Lagunitas.

In addition to the asset sales resulting directly from the mega-merger, analysts say Guinness-maker Diageo could eventually sell its beer business and they also see potential takeovers of brewers in Thailand and the Philippines, albeit at a hefty price.

Deals are getting done. Almost under the radar, Heineken last week swapped assets with Diageo, taking control of businesses in Jamaica, Malaysia and Singapore and selling a minority stake in Guinness Ghana Breweries at a cost of US$780.5 million.

“Our pipeline of add-on M+A is pretty full. We have a small but very efficient M+A team and they are looking at a lot of things, none of them really significant or material, but all of them adding something if we do it on a market-by-market basis,” Debroux said.

— Teis Jensen and Philip Blenkinsop report for Reuters from Copenhagen and Brussels respectively. Additional reporting for Reuters by Martinne Geller in London.

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If it goes through, the deal would rank in the top five mergers in corporate history and be the largest takeover of a U.K. company.

The new group would bring together AB InBev’s Budweiser, Stella Artois and Corona brands with SABMiller’s Peroni, Grolsch and Pilsner Urquell.

For AB InBev — which also owns Canada’s Labatt Brewing and its Canadian brands including Alexander Keith’s and Kokanee — the deal would also add more breweries in Latin America and Asia and crucially opens up new growth markets in Africa.

Africa is expected to see a sharp jump in the legal drinking age population in coming years and a fast-growing middle class more willing to switch to lagers and ales from illegal brews.

Having rejected four previous proposals, the breakthrough came on Monday evening in the Mayfair offices of boutique firm Robey Warshaw, when AB InBev chairman Olivier Goudet agreed to push up the price to a level acceptable for SABMiller.

AB InBev said Tuesday it would now pay 44 pounds in cash per SABMiller share, with a partial share and cash alternative valued at 39.03 pounds a share designed to appeal only to SABMiller’s two biggest shareholders, who together own nearly 41 per cent of the company.

The biggest shareholder, cigarette-maker Altria with a 26.6 per cent stake, later said it was pleased with the deal, but South Africa said it would need to assess tax implications and could “in the extreme” try to block it.

SABMiller said its board was prepared in principle to recommend the main cash offer to shareholders and has asked for a two-week extension to the U.K.-imposed deadline set for 4 p.m. GMT on Wednesday for a formal bid to be made. The new deadline is Oct. 28.

“We have written extensively on the attractions of (an ABI/SAB combination) since 2011 and continue to see major long-term benefits for ABI shareholders now,” said Canaccord Genuity analysts.

For many observers this would be the final chapter of decades of consolidation in brewing. The big four, AB InBev, SABMiller, Heineken and Carlsberg, are already present across the globe and brewing more than half of the world’s beer.

Break fee

The parties have agreed that AB InBev would pay a break fee of US$3 billion to SABMiller if the deal falls through due to the significant regulatory issues or because AB InBev shareholders do not back it.

The new offer unveiled on Tuesday increases a proposal made on Monday to pay 43.50 pounds in cash, which in turn was an increase from the 42.15 pounds it put forward last week.

The 44 pounds now accepted is 50 per cent above SABMiller’s share price on Sept 14, the day before speculation surfaced about an impending AB InBev approach.

The partial share alternative offer has also been improved, with an increase in the cash element raising the value to 39.03 pounds a share from 37.49 pounds last week, but remains designed to appeal only to Altria and SABMiller’s second-biggest shareholder, Colombia’s Santo Domingo family, which owns nearly 14 per cent of the UK-based brewer.

Together with the cash offer to other shareholders, the total price AB InBev is offering to pay for SABMiller is worth 68.5 billion pounds (C$135.5 billion) at current prices.

SABMiller shares were up 9.3 per cent at 39.60 pounds by 2:05 p.m. GMT, when AB InBev’s share price was up 1.8 per cent at 100.10 euros.

Neil Wilkinson, senior equities fund manager at Royal London Asset Management and an AB InBev investor, said he was pleased to see AB InBev finally closing in on a deal it clearly wanted.

“Given its outstanding track record in executing prior transactions, we expect large cost synergies and rapid deleveraging of the balance sheet will allow further transactions a few years down the line, which will enable AB InBev to perpetuate its growth story,” he said.

AB InBev has a reputation for fierce cost-cutting, but will need to be at its sharpest to extract savings to justify the price as well as pushing its global brands into new markets.

Major antitrust hurdles

However, significant regulatory hurdles lie ahead for the proposed merger, particularly in the U.S. where the companies would have about 70 per cent of the beer market.

In particular the deal is expected to result in Denver-based Molson Coors acquiring SABMiller’s 58 per cent stake in their U.S. joint venture.

The joint venture, MillerCoors, produces the two companies’ Miller and Coors beer brands, as well as brands such as Molson Canadian, Foster’s and Perroni, for sale in the U.S.

Analyst say merged group might also have to sell interests in China, where SABMiller’s CR Snow joint venture with China Resources Enterprise is the market leader.

It could also bring change in the soft drinks sector, where SABMiller is a large distributor for Coca-Cola while AB InBev has ties with rival PepsiCo.

Bernstein Research beverage analyst Trevor Stirling said that he rated the chances of the deal going through at 80 per cent, with antitrust issues being the main risk.

“There is a chance that due diligence throws up something nasty,” he said, but added that SABMiller would be unlikely to have accepted AB InBev’s approach if they knew of a major problem.

— Philip Blenkinsop and Martinne Geller report for Reuters from Brussels and London respectively. Additional reporting by Kate Holton, Sinead Cruise and Freya Berry.

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The owner of the Budweiser, Labatt and Alexander Keith’s brands said it would offer 43.50 pounds per share in cash to most SABMiller shareholders, an improvement from the 42.15 pounds it put forward last week.

Under UK takeover rules, AB InBev has until 1600 GMT on Wednesday to launch a formal bid for SABMiller, which would rank as the biggest British company takeover at 67 billion pounds (C$133 billion). SAB can ask the takeover panel for an extension if it wants to continue discussions.

Monday’s sweetened offer is the fourth, following rejections of cash offers at 38, 40 and 42.15 pounds per share.

Three of SAB’s top 10 shareholders had spoken out in support of the board rejecting the previous offer, which SABMiller said “very substantially” undervalued the company.

SAB declined to comment on the new offer, but a source close to the situation said the board would review the new proposal and respond as appropriate. The SAB board was meeting late on Monday, according to Bloomberg and the Telegraph.

Shares of SAB, maker of beers including Peroni and Grolsch, closed down 1.3 per cent at 36.67 pounds, as some investors worried the parties were still too far apart to agree to a deal.

“The last reaction from SAB was that the previous offer was significantly undervaluing it,” said Morningstar analyst Phil Gorham. “The latest offer is not a significant improvement.”

Still, the sweetener may be enough to at least bring SAB to the table.

“We believe today’s proposal will likely put additional pressure on SABMiller’s board to engage in discussions ahead of the ‘put up or shut up’ deadline on 14 October,” analysts at Nomura said. They saw SAB’s move last week, in which it raised its cost-savings target, as aimed at maximising value, not derailing the deal.

Tobacco group Altria Group, which owns about 27 per cent of SABMiller, had already endorsed AB InBev’s last offer, while the Santo Domingo family of Colombia, which owns about 14 per cent, rejected it. Altria declined to comment on Monday, while representatives of the Santo Domingos could not be reached.

The acceptance by both parties of a lower-priced cash-and-share alternative is a precondition to a deal, and Monday’s improved offer significantly improves the offer for them.

AB InBev raised the cash portion of the cash-and-share alternative to 3.56 pounds per share, up from 2.37 last week, an increase of 50 per cent.

“It might get them to talk,” said Exane BNP Paribas analyst Eamonn Ferry.

Very close

The Colombian board members who voted against last week’s offer are Alejandro Santo Domingo and Carlos Alejandro Perez Davila, cousins who also run New York-based Quadrant Capital Advisors.

Yet Alejandro Santo Domingo, a Harvard-educated fixture of New York high society, is, according to media reports, well-acquainted with AB InBev’s controlling shareholders, including Brazilian billionaire Jorge Paulo Lemann.

“We think the Colombians are very close to Lemann and that Lemann knows exactly what price the Colombians want,” said an SAB shareholder with a less than one per cent stake. He said institutional shareholders were not enthusiastic about endorsing any offer without knowing where Santo Domingo stood.

The cash-and-share alternative is meant to be unattractive for institutional shareholders. It was designed “for and with” Altria and the Santo Domingos, who would have to pay large capital gains taxes on cash proceeds.

Taking into account the discounted price of the share alternative, the new offer would involve AB InBev paying roughly 67 billion pounds. The previous offer would have seen the company pay 65 billion pounds.

While AB InBev boss Carlos Brito has not ruled out going hostile, the company has said it prefers a friendly deal.

Yet for AB InBev shareholders, the higher offer means less future upside if the deal goes through. “It’s obviously less attractive than it was and leaves less scope for error,” said one analyst.

— Martinne Geller and Philip Blenkinsop report for Reuters from London and Brussels respectively. Additional reporting for Reuters by Freya Berry in London and Tiisetso Motsoeneng in Johannesburg.

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Refusal of the offer, made public Wednesday after earlier proposals were refused privately, opens the door to a week of intense wrangling before an Oct. 14 deadline for a formal bid set by the U.K. takeover panel.

The deal would be one of the biggest in corporate history, uniting the maker of Budweiser, Corona and Stella Artois beers with that of Peroni, Grolsch and Pilsner Urquell. The combined entity would make nearly a third of the world’s beer.

AB InBev, which is also the owner of Canada’s Labatt Breweries and several major Canadian beer brands, realistically needs access to SAB’s private financial data if it is to make an informed formal bid, but said that so far the board had not engaged meaningfully.

A deadline extension can be granted if SABMiller asks for it, and AB InBev wants shareholders to lobby the company.

“The deadline is approaching and we thought we should make it public,” AB InBev CEO Carlos Brito said on a conference call. “Now it’s up to the shareholders to have a look at it. If they think this is a good offer, they should act and encourage the board to engage.”

Brito said he was committed to a friendly deal, but did not rule out going hostile.

“I don’t want to go there now. I think there’s too much to be gained in the next few days,” he said.

Shareholder response

Belgium-based AB InBev went public with its offer of 42.15 pounds in cash per SABMiller share, after the board rejected two prior approaches, at 38 and 40 pounds. The offer includes a discounted cash-and-share alternative designed only for SAB’s two largest shareholders, Altria Group and BevCo.

The discount aims to satisfy their desire to avoid huge taxes on cash gains and ensure all other shareholders accept cash, which would be financed with the help of a US$70 billion (C$91 billion) debt package being lined up.

Altria, the tobacco group which has 26.6 per cent of SABMiller, said it supported the bid and would be prepared to opt for the share alternative.

AB InBev said it lacked the support of BevCo, controlled by the Santo Domingo family of Colombia. Representatives for BevCo, which owns about 13 per cent of SABMiller, could not be reached by Reuters. BevCo has two seats on the SABMiller board.

SABMiller said its board, excluding the three members nominated by Altria, unanimously rejected the proposal.

“It still very substantially undervalues SABMiller, its unique and unmatched footprint, and its standalone prospects,” the U.K.-based company said in a statement.

SABMiller chairman Jan du Plessis called his company “the crown jewel of the global brewing industry” and said AB InBev’s proposals were designed to be unattractive to many shareholders.

Lawyers not involved in the deal interpreted SAB’s language as implying that it could want as much as 10 per cent more than the proposed price, which amounts to a 44 per cent premium to SAB’s share price before news of AB InBev’s approach was made public on Sept. 16.

AB InBev’s CEO called the price “full” and said SAB’s board was “over-optimistic” about its standalone prospects, saying the company would need an almost 50 percent jump in operating earnings in U.S. dollars to make up the value he is offering and that that would likely not happen for at least three or four years.

The cash-and-share alternative, which is technically open to all shareholders, would give them 2.37 pounds per share plus 0.48 special unlisted AB InBev shares that are convertible into ordinary stock after a five-year lock-up period.

Given that AB InBev intends to use this instrument to acquire the stakes of Altria and BevCo, which together own about 41 per cent of the company, SABMiller said the implied price tag was only 40.21 pounds per share, or 65 billion pounds (C$130 billion).

RBC Capital Markets analysts said the proposal appeared some way below a “knock-out” bid, and Bernstein Securities said a higher bid, and acceptance, was the most likely outcome.

Africa the prize

Analysts have long seen this deal as the likely end-game for decades of industry consolidation, as the big four — AB InBev, SABMiller, Heineken and Carlsberg — already brew over half the world’s beer.

It would add Africa and certain Latin American and Asian breweries to AB InBev’s presence across the Americas.

“We believe Africa in particular will be a key driver for the joint company in the future,” Brito said.

AB InBev also said it planned to establish a secondary share listing and regional headquarters in Johannesburg, where SABMiller has a secondary listing, which local investors have said they want retained.

Public Investment Corp., a South African state-owned firm with a 3.4 per cent stake in SABMiller, said the listing addressed one of its concerns and that it would wait for guidance from SABMiller’s board.

AB InBev — partly controlled by 3G Capital, a private equity fund run by a group of Brazilian investors — has a strong track record for takeovers, followed by keen cost-cutting, but Brito declined to say what potential synergies a SABMiller deal might realize.

AB InBev’s properties in Canada include brands such as Labatt Blue/Bleue, Alexander Keith’s, Kokanee and Oland; breweries in Creston, B.C., Edmonton, London, Ont., Montreal, Halifax and St. John’s, Nfld.; and sales offices and distribution centres.

SABMiller, meanwhile, co-owns a U.S. joint venture with Molson Coors, owner of Labatt’s Canadian rival Molson. Their joint venture, MillerCoors, operates the two companies’ 10 U.S. breweries.

— Philip Blenkinsop and Martinne Geller report for Reuters from Brussels and London respectively. Additional reporting for Reuters by Robert-Jan Bartunek in Brussels and Aastha Agnihotri in Bangalore. Includes files from AGCanada.com Network staff.

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A merged group would have a market value of around US$275 billion (C$363 billion) at current prices, and would combine AB InBev’s dominance of Latin America with SABMiller’s of Africa, both fast-growing markets, as well as their breweries in Asia.

“The real attraction is Africa, where AB InBev has no presence, as well as some add-ons in Asia and Latin America,” said Societe Generale analyst Andrew Holland.

AB InBev and other top brewers trying to move into new markets as they look to shrug off weakness in North America and Europe, where consumers increasingly choose craft beers made by independent players or wine or spirits.

AB InBev’s Canadian arm is Toronto-based Labatt Breweries, which came to the company when Interbrew, which had owned Labatt since 1995, merged into InBev in 2004. InBev then took over Anheuser-Busch to form AB InBev in 2008.

Labatt’s operations in Canada include brands such as Blue/Bleue, Alexander Keith’s, 50, Kokanee, Lakeport, Oland and Schooner; six breweries, in Creston, B.C., Edmonton, London, Ont., Montreal, Halifax and St. John’s, Nfld.; 15 sales offices; and 23 warehouses and distribution centres.

SABMiller, the world No. 2 and maker of more than 200 beers including Peroni, Grolsch and Pilsner Urquell, said on Wednesday it had been informed that AB InBev intended to make an offer which it would have to do by Oct. 14 under British rules.

AB InBev, controlled by 3G Capital, a private equity fund run by a group of Brazilian investors, confirmed its approach. 3G, known for its focus on cost cuts at the expense of marketing, has previously orchestrated takeovers of Burger King, ketchup maker Heinz and Kraft Foods.

A source close to SAB said it was too early to say what it would do, since no offer has been made.

“At this stage, we’re in wait-and-see mode,” said the source.

Speculation about a merger, likely to raise antitrust concerns in markets such as the U.S. and China, has swirled for years. The timing of the approach, after more than a decade of acquisitions by AB InBev, follows a roughly 15 per cent drop in SABMiller’s share price since August.

“It’s exactly the moment they’ve been waiting for,” said Morningstar analyst Phil Gorham. “It makes sense financially for the first time in years.”

AB InBev will have to pay at least 40 pounds (C$81.70) per SAB Miller share, and maybe as much as 45 pounds, according to analysts — implying an overall price of up to US$130 billion, including SABMiller’s debt.

That would make it the biggest M+A deal of 2015, already shaping up to be a record year since the 2008 financial crisis in terms of deal volume, and one the five largest takeovers since 1980.

Shares in SAB closed up 19.9 per cent at 36.14 pounds, giving it a market capitalization of $90 billion. AB InBev’s were up 6.4 per cent. Rivals Heineken, Carlsberg and Diageo also rose on speculation SAB might seek another merger as a defence strategy, as it did last year when it offered to buy Heineken, but was rebuffed.

Since then it has combined its African soft drink bottler with that of Coca-Cola, and in recent weeks there has been speculation about it combining with Diageo or Australian drinks firm Coca-Cola Amatil.

The global beer market share of AB InBev, maker of Budweiser, Stella Artois and Corona, was 21.1 per cent in 2014, while SABMiller’s was 15 per cent, according to industry experts Plato Logic. Heineken is the No. 3.

Room for funding

AB InBev’s target for its net debt to core profit (EBITDA) ratio is 2 times, from around 2.5 currently. It is likely to reach that by 2016, the earliest any deal could realistically be completed, and so has room to borrow to fund any takeover.

When it bought Budweiser maker Anheuser-Busch in 2008 for $52 billion, the largest cash takeover in history at the time, it let the ratio rise to beyond five times. Going that high again might allow it to raise as much as $100 billion in debt.

AB InBev’s controlling families own just over half of the company, while SABMiller’s two top shareholders are cigarette maker Altria and the Santo Domingo family of Colombia.

Altria on Wednesday declined to comment on the AB InBev approach, but on Sept. 9, its CFO Billy Gifford said at an analyst conference that it regularly evaluates its SABMiller investment “and at this time we believe maintaining the asset is in our shareholders’ best interests.”

The Santo Domingo family could not immediately be reached for comment.

Neil Dwane, European chief investment officer, equity, at Allianz Global Investors, which holds shares in both companies, said AB InBev had faced increasing pressure to return excess cash to shareholders.

“ABI is paying a high price but accretion to earnings from low debt costs would be something in the region of 15 per cent. However, we think the return on this deal could be a relatively disappointing eight per cent after 10 years,” Dwane said.

There are significant antitrust hurdles to any combination — particularly in the U.S., where the companies would have about 70 per cent of the beer market.

“The costs that could be saved in the distribution operations are high — and the antitrust hurdles are higher,” said Erik Gordon, professor at the University of Michigan’s Ross School of Business.

A deal would allow Molson Coors to acquire the 58 per cent of the joint venture owned by SABMiller according to the operating agreement that governs it. A change in control at SABMiller would automatically give Molson the right to acquire an additional eight per cent and name a new CEO at the venture. Denver-based Molson would also have the right of first and last offer for the remaining 50 percent stake.

A Molson spokesman declined to comment on whether the company would be interested in a bid, but Molson shares surged more than 12 per cent to an all-time high.

Any merged group may also have to sell interests in China, where SABMiller’s CR Snow joint venture with China Resources is the market leader. Heineken, Carlsberg or China’s Tsingtao could be potential buyers.

Plato estimates that after disposals, the combined group could end up with a 28 per cent global market share.

AB InBev is being advised by Lazard, while SABMiller is being advised by Robey Warshaw, JP Morgan and Morgan Stanley.

— Reporting for Reuters by Philip Blenkinsop in Brussels and Martinne Geller in London. Additional reporting for Reuters by Kate Holton, Alasdair Pal, Freya Berry, Sinead Cruise, Anjali Athavaley, Jilian Mincer and Emiliano Mellino; writing by Christian Plumb. Includes files from AGCanada.com Network staff.

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