The brewer behind Miller Lite and Peroni, SABMiller, and smaller rival Molson Coors have said they will create a joint venture in the US.
The new firm, called MillerCoors, will be 58% owned by SABMiller, but there will be equal say in how it is run.
The two say they hope the merger will let them cut costs by as much as $500m (£246m) a year.
The deal is expected to go through by mid-2008, subject to regulatory clearances and shareholder consent.
The companies said the transaction was driven by a growing need to compete effectively in the US alcoholic beverage market.
"We are excited by the enhanced prospects for growth and the considerable benefits to all stakeholders that this joint venture offers," said Graham Mackay, SABMiller chief executive.
Beer battle
They project that combining their operations will result in beer sales of 69 million US barrels or 8.1 billion litres with revenue of about $6.6bn.
And they expect it to add to their earnings in the second full financial year of creating the joint venture.
It is hoped this will help them to take on the might of American industry leader Anheuser-Busch, which owns the Budweiser and Michelob brands.
In 2005, Anheuser-Busch sold 23.5 billion litres of beer in the US.
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