Giant beer producer SABMiller accepted an increased takeover offer from rival Anheuser-Busch InBev.
SABMiller said it had agreed “in principle” a £44-a-share offer, after four previous attempts from AB InBev.
AB InBev’s brands include Stella Artois, Budweiser and Corona, while SABMiller produces Peroni and Grolsch.
If the deal, worth about £70 billion ($112 billion), goes ahead, the newly-created company will make about 30% of the world’s beer.
SABMiller has a workforce of close to 70,000 people in more than 80 countries, and global annual sales of more than $26 billion. AB InBev has a workforce of 155,000 and global revenues of more than $47 billion.
AB InBev had made four previous bid approaches for SABMiller – at £38, £40, £42.15, and £43.50 per share – but they had been rejected by SABMiller, which argued they undervalued the company.
In a statement, the boards of the two companies said they had now “reached agreement in principle on the key terms of a possible recommended offer”.
The two companies have not yet formally finalized the terms of an offer, but the latest development means they have extended the City deadline for a firm offer until October 28.
The latest proposal comes a day before the original deadline, by which AB InBev had to make a formal bid for SABMiller or walk away for six months.
The offer represents a premium of about 50% over and above SABMiller’s share price in mid-September, before the bid battle started.
On October 13, SabMiller’s share price rose 9% to £39.48 in London trade, while shares in AB InBev were 2.85% higher at €101.15 in trading in Brussels.
Beer giant Anheuser-Busch InBev has announced it had made a takeover move for SABMiller.
The combined value of the world’s two largest brewers is likely to be at least $230 billio based on September 15 share price.
AB InBev’s brands include Budweiser, Stella Artois and Corona, while SABMiller owns Peroni and Grolsch.
If the deal is successful, the merged company would produce one third of the world’s beer.
AB InBev said it had approached SABMiller’s board about a “combination of the two companies”.
However, the company added that there was no certainty the approach would lead to an offer or an agreement.
Earlier, SABMiller said it had been informed that AB InBev was planning to make a bid, but that it had no details as yet.
“No proposal has yet been received and the board of SABMiller has no further details about the terms of any such proposal,” the company said.
Shares in SABMiller jumped 20% on the news to close at 3,614p, while AB InBev’s shares were 6% higher in New York.
Given the size of the deal both parties would be likely to have to sell off parts of their operations to get it past the regulators, and that may mean sacrificing some of their US and Chinese businesses .
The merged company would be likely to move aggressively into faster growing markets.
AB InBev has an eye on the African markets where SAB Miller dominates in 15 countries, and has a presence in a further 21.
A merger would also strengthen its grip on South America and Mexico which are by far its most profitable markets.
This deal has long been anticipated but analysts believe AB InBev was held back from making an offer because of high levels of debt built up through a string of other purchases.
SABMiller has also been trying to do deals. Last year it made an unsuccessful offer for its smaller rival Heineken in a move that was widely seen as an attempt to ward off a bid from AB InBev.