South African Breweries is close to clinching a deal to acquire a majority stake in the Miller Brewing Co from the Philip Morris Cos for about US$5 billion in cash and stock, people close to the companies said Friday.
An announcement could come as soon as Thursday, when South African Breweries, known as SAB, will announce financial results for the year that ended March 31, these people said.
SAB is expected to pay about US$2 billion in cash and US$3 billion in stock for a 67 percent stake in Miller. Philip Morris would retain a 33 percent stake, which it would be prevented from selling for a predetermined period of time, as part of a lockup agreement, these people continued. The structure of the deal is aimed at minimizing Philip Morris' tax liabilities from the sale, they added.
The acquisition would make SAB, the maker of Castle Lager, the world's second-largest brewer, behind the Anheuser-Busch Cos., from its current position as No. 4. It also would allow SAB to reduce its exposure to the volatility of the rand, the South African currency, which has experienced a steep decline in value recently.
"SAB will get a much-improved risk profile, which will be far more attractive to investors," said Michael Bleakley, an analyst with Credit Suisse First Boston.
Spokesmen for SAB and Miller declined to comment.
The challenge for SAB will be to improve Miller's standing in the United States, where it is a distant second to Anheuser-Busch, the maker of Budweiser and Michelob.
That may prove difficult, some analysts said, given SAB's limited presence in the US. Founded in 1895 to quench the thirst of gold and diamond miners, SAB has concentrated on the emerging regions of Africa, Eastern Europe and Asia. Though it grew to dominate its home market, SAB was prevented from expanding internationally during the apartheid years.
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