South African Breweries Plc said it agreed to buy Miller Brewing from Philip Morris Cos for US$5.6 billion to become the world's second-largest brewer.
The London-based brewer will pay about US$3.6 billion in stock and assume US$2 billion in debt for the maker of Miller Lite, Chief Executive Officer Graham Mackay said on a conference call. He said the purchase will add to earnings in the first year with no cost savings.
Mackay is betting he can turn around more than two decades of falling market share at Miller, which failed to counter the catchy ads and expanded distribution network of Anheuser-Busch Cos, analysts said. He has spent US$2 billion in two years to buy rivals in emerging markets such as China as sales fell in South Africa, the company's main market.
"The is a transforming transaction in the ranks of top brewers in the world," Mackay said. "Miller is a very large, strong and profitable company and we welcome the addition to our international profile."
South African Breweries will issue 430 million shares to Philip Morris, including 235 million ordinary shares and about 195 million low-voting participating shares. Philip Morris will hold a 36 percent stake, with a quarter of the voting rights. The brewer plans to change its name to SABMiller.
The value of the South African Breweries shares is based on the closing price yesterday. Based on the price March 14, before speculation about the transaction began, and the exchange rate at that time, they are worth about US$3 billion.
Shares of South African Breweries, maker of Castle Lager and the Czech's Pilsner Urquell, have climbed 13 percent since April 4, when it confirmed the talks over Miller. Investors said South African Breweries shouldn't pay more than US$5 billion.
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