Will Altria investors live the high life? Image: SABMiller.

Tobacco giant Altria Group (MO 0.55%) is well-known for its lucrative cigarette business, which for decades has led the industry with the powerful Marlboro brand dominating market share among U.S. smokers. Yet the jump in Altria shares on Wednesday has nothing to do with tobacco. Rather, Altria is rising on news that beer-maker Anheuser-Busch InBev (BUD 1.23%) has approached the board of directors of rival SABMiller to consider a combination of the two companies. Given that Altria has a stake in SABMiller, it's natural for Altria's shares to follow the brewing company's stock higher, but long-term investors might not be as excited about the prospects for an Anheuser-Busch takeover. Let's take a closer look at what's going on and why Altria investors might think twice about how promising a takeover would end up being for the tobacco company.

Making the move
Details on Anheuser-Busch's proposal were fairly sparse, as the companies haven't released much information about their activities to date. Anheuser-Busch's statement said only that "AB InBev confirms that it has made an approach to SABMiller's Board of Directors regarding a combination of the two companies. AB InBev's intention is to work with SABMiller's board toward a recommended transaction."

Nevertheless, investors were quite happy with the proposal. Predictably, SABMiller shares soared, posting gains of more than 20% on the London Stock Exchange as shareholders predict that any eventual deal could value the company at a far greater level than its current market capitalization. Moreover, unlike with many prospective buyouts, Anheuser-Busch shares also climbed substantially, with gains of nearly 7% in pre-market trading as the company's investors foresee a combined entity that would control a huge swath of the global market for beer.

For its part, Altria enjoyed huge gains as well, rising nearly 6% in pre-market trade. That rise is more or less in line with its share of any potential profits from a SABMiller deal, as Altria holds about a 27% stake in the brewing giant. Yet even with the possibility of a quick payday, Altria investors should see a SABMiller buyout as a mixed blessing at best, depending on how the deal gets structured.

What does Altria want?
Altria's interest in SABMiller has drawn considerable debate among its shareholders. On one hand, many investors value the diversification that the beer business brings to Altria's tobacco-dominated exposure, and SABMiller has consistently delivered considerable profits to Altria's bottom line quarter after quarter. Yet others argue that SABMiller is a non-core business and have pushed for Altria to sell off its interest, with management pushing back in the past due to concerns about the tax impact of a sale.

Now, Altria finds itself at a crossroads. On one hand, any takeover from Anheuser-Busch would likely be Altria's best opportunity to cash out of its SABMiller holding at a maximum profit, taking the proceeds and finding new ways to reinvest in its core businesses or pay a huge special dividend to shareholders. Yet if Altria truly wants to remain diversified and have exposure to the beer industry, it will likely push for a stock-based takeover deal that would offer at least the possibility of having the transaction treated as tax-free if Altria holds onto any Anheuser-Busch stock it takes in exchange.

What's next?
Because SABMiller is a U.K. based company, it had to comply with rules governing mergers and acquisitions there by setting expectations for future action on any takeover. The company's statement set a deadline of October 14, by which time Anheuser-Busch InBev needs either to make a definitive offer or face a long delay.

Some foresee possible antitrust problems, especially given SABMiller's close relationships with partner beer-makers in the U.S. and China. On the other hand, many investors believe that a divestiture could satisfy regulators that the industry would remain competitive.

In the end, the key to the deal for Altria investors is whether the companies structure a transaction to receive Anheuser-Busch InBev shares, cash, or a combination. Given its considerable stake, Altria will have a voice at the takeover table, and it'll be interesting to see how it chooses to flex its muscles to influence the final result of buyout negotiations.