NEW YORK (CNN/Money) - South African Breweries has agreed to buy Miller Brewing from Philip Morris Cos. for $5.6 billion in stock and assumed debt, the companies said Thursday.

The acquisition will create the world's second-largest brewer behind Budweiser brewer Anheuser-Busch Cos. Inc. (BUD: up $0.37 to $51.00, Research, Estimates) SAB, which will change its name to SABMiller, will pay $3.6 billion in stock and take on Miller's debt of $2 billion.

The deal, which the companies expect to close in July, subject to approval by regulators and SAB shareholders, was made in response to consolidation in the global beer industry, Philip Morris CEO Louis Camilleri said in a conference call.

"The pace of consolidation has accelerated, and we believe the trend will continue as brewers pursue global or regional expansion," Camilleri said. "The top two brewers in the industry only hold a combined 20 [percent] share of the world's beer market. Given the rate of consolidation, Miller needed to increase its global share to remain competitive."

Philip Morris, the world's biggest cigarette manufacturer, will own 36 percent of the new SABMiller, have a 24.99 percent voting right at shareholder meetings and will place three directors on SABMiller's board.

Philip Morris, which makes Marlboro cigarettes and owns most of Kraft foods, will receive 430 million SABMiller shares and has agreed not to sell any shares before June 30, 2005, or buy any more until Dec. 31, 2004.

Philip Morris (MO: Research, Estimates) shares rose 91 cents Thursday to close at $56.01 as word that the sale was imminent spread through Wall Street, bringing a positive reaction. They rose slightly in before-hours trading Thursday after the deal was announced.

"This deal is attractive to Philip Morris shareholders, and a stake in global SABMiller probably has better growth prospects than Philip Morris' existing ownership of Miller," Merrill Lynch analyst Martin Feldman said in a research note.

In the conference call, CEO Camilleri confirmed that the $1.7 billion in cash Philip Morris will receive in the deal, after taxes, will be used in a stock buyback program this year, pushing the total buyback to $6 billion -- more good news for shareholders.

The repurchase program will make the merger basically neutral to operating earnings per share in 2002 and 2003 and will begin to add to earnings after that, Camilleri said. He reiterated Philip Morris' expectations for earnings per share growth of between 9 and 11 percent in 2002.

Related links       Miller Brewing SAB Philip Morris

Milwaukee, Wis.-based Miller, whose brands include Miller Lite and Miller Genuine Draft, is the second-largest brewer in the United States and sixth-largest in the world. SAB, which brews Castle and Pilsner Urquell beers, currently is ranked number four in the world and markets its brands in Africa, China and Eastern Europe.

SAB has set its eyes on the world stage, becoming the largest non-Chinese brewer in China. It is following the same strategy with Miller, buying a domestic brewer and shaping its beer production rather than introducing its own brands, such as Castle, the best-known South African beer brand.

Dresdner Kleinwort Wasserstein, Inc. and Lehman Brothers Inc. served as financial advisors for Philip Morris. J.P. Morgan advised South African Breweries.