After more than a year of negotiations, SABMiller Plc, the world's second largest beer company, will take management control of the Manu Chhabria family-controlled Shaw Wallace Breweries.

The two parties have decided to combine their beer operations in India in the largest merger-cum-acquisition in the liquor industry.

According to the deal, signed in Dubai, SABMiller's Mysore Breweries will be merged into Shaw Wallace Breweries, giving it a market share of 35 per cent and a leading position in the fast growing beer market. SABMiller's other Indian subsidiaries are now being integrated into Mysore Breweries.

The two partners will have 50 per cent stake each in the merged entity, with SABMiller investing $132.8 million (Rs 625 crore) in it. This represented the book value of the net assets and cash contributed in exchange for the 50 per cent interest of Mysore Breweries in Shaw Wallace, a statement said.

The Chhabrias are, however, ceding management control of the venture to SABMiller. Richard Rushton, managing director of SABMiller, India, will be the managing director of Shaw Wallace Breweries, and Vidya Chhabria will continue as chairman. Daughter Komal Chhabria Wazir has been appointed to the board of SABMiller Asia BV.

"We are paying a fair price, considering we are also getting management control," Rushton said, adding that Shaw Wallace had not been paid any management control premium. "We were clear to take up an equity position only to have control over day-to-day operations."

The new company will have a national manufacturing base of 11 owned breweries and 11 contract ones, and a wide portfolio of brands, including Haywards, Royal Challenge, Castle Lager and Knockout.

Shaw Wallace is the second largest brewing group in India, after Vijay Mallya's United Breweries and the Millennium Alcobev combine, in which multinational Scottish & Newcastle recently picked up a stake for over Rs 425 crore (Rs 4.25 billion).

SABMiller has been on a buying spree in India since it first entered the market in October 2000 with the acquisition of Narang Breweries. In 2001, it acquired a controlling interest in Mysore Breweries and Pal Distilleries, and Rochees Breweries in Rajasthan. SABMiller has an 8 per cent share in the Indian beer market.

After eight years of financial trouble, Shaw Wallace has split its liquor flagship into three companies: a holding company owning the brands, a liquor arm and a breweries firm.