South African Breweries (SAB) is reportedly talking with the tobacco giant Philip Morris about buying its Miller Brewing company in the US for about $5bn (�3.5bn) in shares and cash.

As part of a deal, Philip Morris would become the owner of about a quarter of SAB and agree not to sell the stake immediately, the Wall Street Journal said.

A combination of SAB and Miller would create the world's second largest brewer.

The group would include SAB's Pilsner Urquell and Castle Lager as well as Miller's own brand beers and its Milwaukee brands.

Expansion

An SAB spokesman told BBC News Online that he could not comment on speculation.

But he pointed out that "SAB has [already] grown to become the third largest brewer in the world and we have grown by acquisition".

As a consequence rumours about merger talks involving SAB have been rife.

Previous rumours of merger talks between SAB and Miller have included Scottish & Newcastle in the UK.

Such a deal would create a new world leader in the brewery sector, overtaking Anheuser-Busch and Heineken, according to US press reports.

"We are busy acquirers," acknowledged the SAB spokesman.

SAB has been focusing on the markets in Africa including South Africa, Central America, China, India, and Eastern Europe including Russia.