It's Miller Time for South African Breweries

South African Breweries (SAB) today bought the world's biggest round of Miller beer, agreeing to pay out $5.6bn (£4bn) for a controlling stake in America's Miller Brewing Company.

If approved by shareholders and regulators, the deal would make SABMiller the second largest brewer world wide, bested only by US giant Anheuser-Busch, brewer of Budweiser.

London-based SAB has offered $3.6bn in stock for a 64% stake in Miller and agreed to assume $2bn of the US brewer's debt. Miller's parent company, New York-based Phillip Morris, would initially keep a 36% stake.

The deal is expected to close as early as July.

Buying Miller would mark 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," SAB said in a statement.

Philip Morris chief executive Louis Camilleri said SABMiller would have "arguably the best geographic footprint among all global brewers."

SAB already exports Pilsner Urquell to the US 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.

SAB's shares slipped 3.4% to 556.50p in early trading on the London stock exchange.

SABMiller's headquarters would be 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 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.

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

"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.

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.

Miller was founded in 1855 in Milwaukee, a city renowned for its breweries. Mr Brophy said the acquisition would not lead to any job cuts at Miller's seven US breweries.