Make It a Double: The World's Two Largest Brewers Agree to Merge

After weeks of negotiation, AB InBev has agreed to purchase SABMiller for more than $104 billion.

It’s time to pop open the champagne of beers, as the world’s two largest brewers celebrate a merger deal.

A week after SABMiller rejected a takeover bid from AB InBev, the world’s largest brewer, the two companies have agreed in principle to merge, creating a beer behemoth. That’s the culmination of about a month of talks between them. Last week, AB InBev went public with its frustration after three bids prior were rejected. While SABMiller’s board remained aloof, Altria—the American tobacco giant that is SABMiller’s biggest shareholder—issued a separate statement in favor of the deal.

On Tuesday, Altria (along with BevCo, another large shareholder) got its way, but the deal also required AB InBev sweetening its offer, giving SABMiller a slightly higher offer per share; the final deal will be worth $104.2 billion. Altria and BevCo will receive a special kind of share, locked up and non-tradeable for five years, which will help them dodge a tax bullet. Other shareholders can take cash or the same deal.

A partial list of the beers the deal will bring under the same roof would fuel a raucous weekend on any college campus: Bud, Bud Light, Corona, Michelob, Stella Artois, Becks, Hoegaarden, Leffe, Coors, Coors Light, Grolsch, Icehouse, Keystone, Milwaukee’s Best, Blue Moon, Foster’s, Pilsner Urquell, Peroni, Miller Lite, and High Life.

Analysts have long felt that a merger between the two companies was just as inevitable as regretting that Raz-Ber-Ita. The world beer market has been consolidating, and slowing economies in some of the places where the market has expanded most in recent years—especially Brazil and China—means brewers need new ways to grow. A map of beer dominance in both South America and Africa looks like a patchwork quilt, with SABMiller and AB InBev strong in different regions. A merger will allow them to exercise more influence across the map.

Shares in both companies rose on news of the deal. Like all the best celebrations, though, this one may leave the partiers with a hangover. While a merger will provide new reach and economies of scale, regulators in the U.S. and Europe may have reservations about the size of the combined company and force it to shed some holdings before approving the deal.

According to a Reuters report Monday, AB InBev may already be in American antitrust regulators’ sights. Craft brewers allege that as their market share grows, AB InBev is trying to hobble them by purchasing beer distributors, which creates a barrier between brewer and market that no amount of hopping—dry or otherwise—can overcome. The Justice Department has begun investigating the claim, and AB InBev confirmed to Reuters that it’s talking to regulators. Like other major brewers, AB InBev has tried other methods to tap into the craft market—notably buying up smaller brewers, including Goose Island and Blue Point.

But all that is a worry for tomorrow. Tonight, drinks are on Altria.