SABMiller unveiled a takeover deal worth $7.8bn (£4.48bn/€6.5bn) today to cement its position as the world’s second-largest brewer.
The acquisition of Colombian rival Bavaria – widely expected in the City - gives SABMiller a major footprint in Latin America and sent its shares more than 4% higher.
Bavaria controls more than 90% of beer markets in Colombia, Peru and Ecuador as well as a 79% share in Panama, although its brands are little known in the UK.
SABMiller expects to save $120m (£68.9m/€100.2m) in annual costs from the deal within five years, while tapping the strong growth in beer consumption in the region.
Volumes of beer sold in the Andean region of South America are expected to grow annually at a compound rate of 4% over the next five years – in contrast to just 2% across the global beer industry as a whole.
SABMiller said the deal will “further diversify” its portfolio of businesses and brands such as Miller Lite, Pilsner Urquell, Peroni and Castle.
Chief executive Graham Mackay said: “We are excited by the enhanced prospects for growth, in a strategically important market, which the combination with Bavaria brings. We are confident that together the business will generate considerable benefits for all stakeholders.”
In 2004, Bavaria made pre-tax profits of $430m (£247.1m/€359m) and had gross assets of around $5.2bn (£2.99bn/€4.3bn).
This profits performance was dwarfed by the $2.42bn (£1.22bn/€2bn) banked by SABMiller in the year to March 31.
Terms of the deal mean that SABMiller will take control of 71.8% of shares in Bavaria. In return, the company will give the owner of Bavaria – Santo Domingo Group – around 15.1% of its own stock.
SABMiller said it expects “substantial profit improvements” at Bavaria, which also produces soft drinks, water and milk, after it takes control.
SABMiller, listed on both the London and Johannesburg stock exchanges, has 42,000 employees. Outside the United States, the company is one of the largest bottlers of Coca-Cola products in the world.