Anheuser-Busch InBev and SABMiller Agree to Form Massive Beer Company in Record Deal

The world's largest beer company, Anheuser-Busch InBev, announced a deal in principle today to merge with the world's second-largest beer company, SABMiller, for $104 billion.

Under the terms of the deal, which has not yet been signed, AB InBev, which owns such brands as Budweiser, Corona, and Stella Artois, will take over SABMiller, whose holdings include Coors, Fosters, and Miller. The combined companies would create a beer behemoth worth about $275 billion, cornering a third of the world's beer market in the process.

This merger would be the biggest the beer industry has ever seen, and one of the biggest corporate mergers in history. The details have not been finalized, however, and will likely draw scrutiny from regulators in the United States and other countries over possible violations of antitrust laws.

George A. Hay, a professor of economics at Cornell Law School, said that the companies have likely assessed what sacrifices they would be willing to make to win approval from regulators. In the US, for example, SABMiller will likely be forced to sell off its share of MillerCoors, which it owns in a joint venture with Molson Coors. But Hay said that regulators elsewhere, particularly in China, could potentially demand that the companies sell off other assets in order to merge — which might have the effect of making the deal less economically beneficial, causing it to fall through.

"China is very unpredictable," Hay said. "Their antitrust laws are very new. There's not a lot of track record on them, and there's the possibility that China could use antitrust laws differently than the US. We don't try to support US companies, we look at competition on the merits. But China might be concerned about whether any of their domestic companies might be affected, so they're a bit of a wildcard."

AB InBev has agreed to pay SABMiller $3 billion if the deal fails to clear regulatory hurdles.

Related: As Craft Beer Surges, the World's Two Biggest Beer Companies Weigh Merger

Nick Petrillo, an analyst with the market research company IBISWorld, said the deal will allow both companies to expand in countries where there is still significant growth potential, unlike the domestic US market.

"The US hasn't been an important market for some time," he said. "The primary target here is India, Africa, and Central Europe, places where AB InBev doesn't have a significant stake but SAB Miller does."

Petrillo predicted that if the deal goes through, beer drinkers would not notice any shift in pricing or availability of the more than 200 beer brands owned by the new venture.

AB InBev first announced that it was considering this merger last month, prompting speculation that the beer brands were responding to the explosive growth of independent craft brewers in the US in recent years. Petrillo said that was only partially true, and that the companies were really focused on growing their market share abroad.

"The general consensus is that the reason this is happening is the looming threat of craft beer," Petrillo said. "I think people see the merger as a sign that companies are hemorrhaging money and craft beer is destroying them from within, but I don't think that's true. I think it's just a good business opportunity."

The companies have until October 28 to decide whether to move forward with the deal.