InBev offers $46b for Anheuser-Busch

InBev NV offered to buy Anheuser-Busch Cos, the maker of Budweiser beer, for $46.3 billion in cash to create the world's biggest brewer with half of the US market.

Anheuser-Busch climbed as much as 9.7 percent in late New York trading on Wednesday after saying its board will evaluate the $65-a-share proposal.

"I think shareholders are going to be pretty pleased with that price," Donald Yacktman, an Anheuser-Busch investor who oversees $1 billion as president of Yacktman Asset Management, said. Warren Buffett's Berkshire Hathaway Inc is Anheuser-Busch's second-biggest shareholder.

A takeover would be the biggest cash deal on record. It would combine Budweiser, the iconic lager first brewed 132 years ago in St. Louis, with InBev's Stella Artois and Bass brands. In a 20-year acquisition spree, InBev has grown from a collection of family-owned Flemish beers to become the world's top brewer by sales, dominating the Latin American market.

InBev said that it intends to finance the transaction with at least $40 billion in debt arranged by banks including Banco Santander SA. It said two directors, Jorge Paulo Lemann and Marcel Telles, had a June 2 meeting with Anheuser-Busch Chief Executive Officer August A. Busch IV, at which Busch asked if they had a formal proposal, InBev said.

The bid was 11 percent higher than Anheuser-Busch's share price at the end of New York Stock Exchange composite trading. The shares rose $4.38, or 7.5 percent, to $62.73 at 7:58 pm New York time in trading after the close of the exchange.

The name of the combined company would "evoke Anheuser-Busch's heritage", InBev said. The Leuven, Belgium-based beermaker doesn't plan to close US breweries.

"We can achieve more for our various stakeholders than would be possible apart," InBev CEO Carlos Brito said in a letter to Busch that InBev made public on Wednesday (local time).

Little US presence

While InBev has operations in at least 30 countries and sells in more than 130, it generates less than 1 percent of its beer volume in the US. Industrywide sales in the country are almost $100 billion a year, according to Euromonitor Plc. SABMiller Plc has the world's most beer sales when measured by volume.

August Busch IV sent an e-mail to the company's beer distributors, saying a decision may take months or longer, according to the newsletter Beer Business Daily.

Yacktman said resistance to the deal might come from the Busch family, who "may view this as their company instead of the shareholders' company". August Busch IV is the fifth generation of Busch family members to run the brewer and the great-great grandson of co-founder Adolphus Busch.

Credit-default swaps tied to Anheuser-Bush's bonds, used to speculate on a company's creditworthiness or to hedge against losses, jumped to a record on concern that InBev would load up the company with debt to fund the takeover.

The contracts rose as much as 28 basis points to about 100 basis points before falling back to 86 basis points, according to New York-based Credit Derivatives Research LLC.

An acquisition would exceed the $41 billion cash purchase of AT&T Wireless Services Inc. by Cingular Wireless LLC in 2004, according to data compiled by Bloomberg.

Miller, Coors

InBev's bid follows SABMiller's agreement to combine its US division with that of Molson Coors Brewing Co. Anheuser-Busch, the world's biggest brewer for five decades before being overtaken by InBev, has been selling the Belgian company's Beck's and other brews in the US for the past year.

The offer by InBev, which hired Lazard Ltd and JPMorgan Chase & Co as financial advisers, is 24 percent more than Anheuser-Busch's share price on May 22, the day before the Financial Times' Alphaville blog reported InBev's interest.

Formed by Interbrew SA's $11.2 billion takeover of Brazil's Cia de Bebidas das Americas in 2005, InBev has sought growth outside of western Europe as consumption in the region slows.

InBev's acquisition strategy, which relies on cutting costs, might clash with the culture of Anheuser-Busch, known for close relationships with distributors and expensive marketing.

After taking over as president of InBev's Labatt Brewing Co in 2004, Brito fired staff and closed a brewery.

"InBev would focus its efforts on streamlining the US beer giant, a possibility which might not sit well with Anheuser-Busch distributors," Jonathan Feeney, an analyst with Wachovia Securities Inc in New York, said in a note to investors.

Agencies

(China Daily 06/13/2008 page16)