South African Breweries to buy America's Miller Brewing Co.

LONDON AP reported that South African Breweries PLC has agreed to buy Miller Brewing Co. of the United States for $3.6 billion in stock to become the world's second-largest brewer, the London-based company announced Thursday.

The new company will be called SABMiller PLC and compete in the U.S. market with Anheuser-Busch Cos., the world's largest brewer.

The deal is expected to close as early as July, pending shareholder and regulatory approval, South African Breweries said.

SAB has agreed to buy a 64 percent stake in Miller for $3.6 billion in stock and also assume $2 billion in Miller debt, making the acquisition worth a total of $5.6 billion. Miller's parent company, Philip Morris Cos. of New York, would initially keep a 36 percent stake in SABMiller.

The Miller deal marks a major step in SAB's strategy of expanding largely through acquisitions to become a top player in the consolidating global beer business.

"SABMiller (would) be one of the world's most diverse international brewers with leading market positions in Europe, North America, Central America, China and Africa," South African Breweries said in a statement.

Philip Morris chief executive Louis Camilleri said SABMiller would be the world's second-largest brewer "with arguably the best geographic footprint among all global brewers."

SAB already exports Pilsner Urquell to the United States and has said it hopes to expand its import business there. Its other major brands include Castle in southern Africa, Tyskie in Poland, Zolotaya Bochka in Russia and Zero Clock in China.

Shares of SAB slipped 3.4 percent to 556.50 pence ( $8.12) each in early trading on the London Stock Exchange.

SABMiller would be headquartered in London, with Miller's Milwaukee, Wisconsin, headquarters acting as a subsidiary, said Miller spokesman Michael Brophy.

SAB already is the world's fourth-largest brewer by volume, after St. Louis, Missouri-based Anheuser-Busch, Belgium's Interbrew and Heineken NV of the Netherlands, according to data from 2000 compiled by British beverage consultancy Canadean. Miller ranks sixth in the world.

Brophy said Miller and SAB both saw industry leaders merging and felt a union was the best way for them to stay competitive.

"In this day in the brewing industry where consolidation is occurring, this is a very important move for both companies, and that's why people at Miller are very enthusiastic," he said.

Philip Morris has wanted to sell its beer business because Miller has lost market share over the past decade, analysts said.

Camilleri told industry analysts last fall that the tobacco-food giant's beer business has continued to face challenges. Profits have dropped as sales declined and advertising costs increased for Miller's strongest brands, such as Miller Lite and Miller Genuine Draft.

For SAB, the deal would provide a major base in the United States and reduce its dependency on earnings made in the rand, the weak South African currency.

Until Thursday's deal, the majority of SAB's business was in Africa. The company was founded in 1895 in South Africa, and retains a listing on the Johannesburg stock exchange. It moved its primary listing to the London Stock Exchange in 1999, to increase its access to capital for international expansion.

Miller was founded in 1855 in Milwaukee, a city renowned for its breweries.

Brophy said the acquisition would not lead to any job cuts at Miller's seven U.S. breweries.