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LONDON—SABMiller PLC's board has agreed on the key terms of a sweetened potential takeover offer by Anheuser-Busch InBev NV valuing it at £ 68 billion ($104.36 billion), setting the stage for the creation of a brewing behemoth that would dominate much of the world's beer market.

After weeks of back and forth, SAB Miller's board has agreed to unanimously recommend to its shareholders AB InBev's proposal to pay £ 44 a share to buy the London-based brewer, marking a 50% premium to its share price on Sept 14, the day before media speculation about a potential deal emerged. For 41% of stock AB InBev is offering a partial-share alternative, essentially a combination of cash and stock translating into a lower per-share price of £ 39.03. The alternative was devised for SABMiller's two largest shareholders, Altria Group Inc. and the Santo Domingo family's investment vehicle BevCo, and helps them with taxation and potential accounting issues.

SABMiller has asked the U.K. Takeover Panel to extend the so-called put-up-or-shut-up deadline, under which AB InBev needs to make a firm offer for it or walk away, to Oct 28. The previous deadline was Wednesday.

If AB InBev can't get the necessary regulatory clearances for the deal to close, or its shareholders don't approve the deal, the brewer would pay SAB Miller a breakup fee of $3 billion. AB InBev said it will pay for the cash part of the deal through its internal resources and issuing new debt.

The revised proposal is the fifth AB InBev has made for SABMiller in recent weeks and comes after the Belgian brewer on Monday said it was prepared to offer SABMiller's shareholders £ 43.50 a share in cash and a partial-share alternative of £ 38.88, translating into a combined price of £ 67.4 billion.

SABMiller had rejected its first three proposals, saying they significantly undervalued it. On Monday, it declined to comment on the fourth proposal.

SABMiller's two largest shareholders, Altria and the Santo Domingo family, which have a 41% stake in the London-headquartered brewer between them—had initially come down on different sides of the offer. Altria, last week offered its support, but the Santo Domingo family joined the rest of the board in rejecting AB InBev's offer.

Tuesday's deal is unanimously supported by SABMiller's board, meaning the Santo Domingo family changed its mind.

A tie-up between the two beer companies, if successful, would bring household brands such as Budweiser, Corona and Stella Artois together with Pilsener Urquell, Grolsch and Peroni, and give the combined company a major presence in the U.S., China, Europe, Africa and Latin America. Together, AB InBev and SABMiller sell over 30% of the world's beer.

AB InBev's next big challenge is to get regulatory approval for the deal, which is expected to face antitrust scrutiny around the world and could take as long as a year to close according to some antitrust experts.

The biggest regulatory hurdle is likely to be the crucial U.S. market, where AB InBev already has a roughly 45% market share and London-based SABMiller controls a further 25% through its MillerCoors LLC joint venture with Molson Coors Brewing Co. AB InBev was forced to dramatically restructure its $20.1 billion acquisition of Mexican brewing giant Grupo Modelo SAB in 2013 after the U.S. Justice Department sued to block the deal.

Another potential regulatory headache is China, where AB InBev had a 14% market share last year, according to Euromonitor. Chinese authorities could require the brewer to exit SABMiller's joint venture with China Resources Enterprise Ltd., which controls 23% of the market and produces the top-selling Snow brand. Some divestitures could also be required In Latin America.

A question mark also hangs over the fate of the two brewers' bottling arrangements with arch rivals Coca-Cola Co. and PepsiCo Inc. SABMiller has disclosed in regulatory filings that a change of control at the company would give Coke "certain rights" under their bottling agreements. AB InBev's bottling agreements with PepsiCo are set to expire at the end of 2017. The agreements are automatically extended for another 10 years unless either company gives written notice at least two years before they expire.

The acquisition of SABMiller, with its big presence in Africa, would give AB InBev a major launchpad for its beers in markets where it has virtually no presence. Consumption in developed markets has slowed so much that the global beer market is expected to decline this year for the first time in 30 years, falling by 0.1%, according to industry tracker Plato Logic. The bulk of global growth will come from Africa, which is expected to grow by 2.6%

A deal between SABMiller and AB InBev has been rumored for years, and has been described by some analysts as the last major piece of consolidation that remains in the beer industry. Research firm Euromonitor has estimated that the combined company's market share would be 29% after the deal after likely divestments, giving it a 20 percentage point lead over the next biggest brewer, Heineken NV.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

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(END) Dow Jones Newswires

October 13, 2015 03:35 ET (07:35 GMT)

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