• by Thom Forbes  @tforbes, October 13, 2015

Belgian-Brazilian brewer Anheuser-Busch InBev, a determined suitor if there ever was one, finally won the hand of London-based SAB Miller this morning — “in principle” — with a $106 billion merger offer that will make the combined entity a behemoth in a consumer market increasingly enamored of craft brews. But if the deal is to be approved by antitrust regulators in several countries, divestments are sure to come.

“The two companies are by far the largest players in the industry by almost every metric. Market share is the first one that jumps to mind for many merger arbitrageurs who wonder how such a deal would fare with antitrust regulators,” writes Bloomberg’s Phil Serafino. “Combined, the two companies would control almost 30% of the global beer market. To put that in perspective, OPEC controls about 41% of the world oil market.”

The combined company, with headquarters in Belgium, would bring “household brands such as Budweiser, Corona and Stella Artois together with Pilsner Urquell, Grolsch and Peroni, and give the combined company a major presence in the U.S., China, Europe, Africa and Latin America,” writes Saabira Chaudhuri for the Wall Street Journal. 

“SABMiller said it had indicated to AB InBev that its board would be prepared to accept the offer and said it had asked for a two-week extension to the deadline set for its rival to announce a firm intention to bid. The new deadline is Oct. 28,” write Reuters’ Philip Blenkinsop and Martinne Geller. “The parties have agreed that AB InBev would pay a break fee of $3 billion to SABMiller in the event the transaction fails due to the significant regulatory issues or because AB InBev shareholders do not back it.”

U.S. regulators may prove to be the most nettlesome. AB InBev has about a 45% share here and SABMiller controls a further 25% through its MillerCoors LLC joint venture with Molson Coors Brewing Co., Chaudhuri reports. China is another potential problem, as is Latin America. The most notable divestiture expected, observers say, is SABMiller’s stake in MillerCoors.

Meanwhile, MillerCoors’ CMO David Kroll tellsAd Age’s E.J. Schultz  that speculation about the merger has not been a “distraction to our organization at all” over the past month. “Kroll in recent weeks oversaw major changes to the MillerCoors agency roster, including the recent hire of 72andSunny as lead agency for Coors Light,” Schultz points out.

Changing consumer tastes present a different kind of problem for the big breweries, and acquisitions have been the answer to that challenge.

“As younger drinkers turn in ever greater numbers to independent breweries, the global market leaders have been trying to defend their market share,” writes Charles Riley for CNNMoney. “AB InBev has swallowed Seattle's Elysian Brewing, Oregon's 10 Barrel Brewing and Chicago-based Goose Island in the last year or two. SABMiller has also tapped into the craft beer scene, buying one of the UK's most successful independents, London's Meantime Brewing Company.”

Then there are the markets with untapped potential.

Carlos Brito, AB InBev’s CEO, said last week that a combined company “would be good for consumers because AB InBev would be able to sell its brands in Africa and other markets where SABMiller has big operations,” reports Sean Farrell for the Guardian. 

SABMiller, which was founded in Johannesburg in 1895 during a gold rush, makes about 28% of its revenue there. “As African beer drinkers have become more prosperous over the past 20 years, they have moved out of the informal home-brewing market and started to buy branded beer,” the BBC observes.

The accord follows “a frantic day of negotiations in London on Monday between Jan du Plessis, the South African chairman of SAB,” and Brito,” the Financial Timesreports, with “du Plessis holding out for more money and Brito refusing. A deal was clinched only after Olivier Goudet, chairman of AB InBev, intervened and said his company would raise its cash offer for a fifth time.” 

That £44 a share offer represents a 50% premium to SAB’s share price “on Sept. 14, the day before media speculation about a potential deal emerged,” writes the WSJ’s Chaudhuri. “For 41% of stock, AB InBev is offering a partial-share alternative, essentially a combination of cash and stock translating into a lower per-share price of £39.03. The alternative was devised for SABMiller’s two largest shareholders, Altria Group and the Santo Domingo family’s investment vehicle BevCo, and helps them with taxation and potential accounting issues.”

“Overall, for once I would have said it is a decent deal for both shareholders as AB InBev probably will extract the synergies and consolidate a declining market,” John Colley, a professor at the U.K.’s Warwick Business School, tells CNBC via email. 

“However, he added that he expected substantial redundancies and cost savings over the next year and said product ranges are likely to be rationalized, allowing greater investment in the retained brands,” writes Matt Clinch.