InBev and Anheuser Agree to $52 B Offer

123jump.com Staff
14 Jul, 2008
New York City

Anheuser-Busch, the century old family controlled beer brewer agreed to a hostile offer of $70 per share or $52 billion from InBev NV. The newly merged company will not only have the largest market share in the U.S. but also will have largest worldwide revenue, surpassing SABMiller sales. The all-cash offer was agreed on Sunday and investment stake controlled by Warren Buffet expects to make $770 million in capital gains.

[R]3:30 PM New York - Anheuser Busch agreed to accept $52 billion or $70 per share cash offer from Anheuser Busch after key shareholders reversed their earlier opposition.[/R]

Anheuser-Busch Company, the beer brewer agreed to be taken over by Brazil and Belgium based InBev for $52 billion, ending two months of battle after key Anheuser Busch shareholders and board of directors agreed to a revised all cash offer. The merged company will be named Anheuser Busch InBev and will be the largest beer company in the world.

The newly merged company will overtake SABMiller in worldwide sales. InBev sweetened its initial $46 billion or $65 per Anheuser-Busch share by 8% or $5 per share.

InBev has paid $50 million in fees to obtain the committed financing for the deal. It paid the fees to Banco Santander, Bank of Tokyo-Mitsubishi, Barclays Capital, BNP Paribas, Deutsche Bank, Fortis, ING Bank, JPMorgan, Mizuho Corporate Bank and Royal Bank of Scotland.

The newly merged company will control 50% of the U.S. market and 30% is controlled by MillerCoors LLC, a joint venture between U.S. businesses of SABMiller and Molson Coors.

Berkshire Hathaway controlled by Warren Buffett has recently trimmed its stake in the company to 5% from 5.6% stake in 2005. The legendary investor is likely to earn $770 million in capital gains if the deal between the two brewers is completed.

Merger Synergies

InBev is the world''s second largest brewer, with brands such as Stella Artois and Beck''s. The Belgian Company also makes Beck''s, Hoegaarden and Staropramen and has a distribution deal with Anheuser for its beers in the US.

In addition to Budweiser, U.S’s biggest beer brand, Anheuser’s brands include Michelob, Bud Light and Rolling Rock.

Competitors, Heineken and Carlsberg have been expanding and jointly purchased Scottish & Newcastle earlier this year.

SABMiller added Molson Coors Brewing Co to its U.S business, hoping to cash in on firmer beer sales in America, now approaching $100 billion.

Merger and acquisitions works from rivals had put pressure on Anheuser-Busch, which, like other big domestic brewers, is losing business to wine, liquor and “craft” brews.

InBev and Anheuser hope to gain market share in fast growing markets in Eastern Europe and China. InBev will also have a presence is the fast growing Chinese market, where Anheuser-Busch hold a 27% stake in Tsingatao Brewery Co. InBev has a strong presence in Europe and Brazil.

InBev estimates the merger will save the group up to $1.5 billion per year despite the expression of non-commitment from Grupo Model, the Mexican brewer, 50% owned by Anheuser-Busch. Grupo Modelo has right to choose own partner, according to Mexican statutes.

The newly merged companies will have combined sale of $36.4 billion per annum and 46 billion litres of beer. Anheuser earned $2.820 per share in the past twelve months and analysts are looking for 93 cents per share in the quarter ended in June.

InBev, itself formed by the $11 billion merger of Interbrew SA and AmBev in 2004, described the deal as ""historic"".

""Together, Anheuser-Busch and InBev will be able to accomplish much more than each can on its own,"" said InBev chief executive Carlos Brito, who will become chief executive of the new firm.

August Busch IV, Anheuser-Busch president and chief executive said: “This agreement provides additional and certain value for Anheuser-Busch shareholders, while enhancing global market access for Budweiser, one of America''s true iconic brands. We will leverage our collective strengths to create a truly diversified, global company to sustain long-term growth and profitability.”

In the United States and Canada, August said they had “seen significant benefits from our existing relationship and we look forward to replicating this success in other parts of the world.”

Share Price Review

Shares of InBev finished down 3.4% or 1.500 euro at 43 euro in Brussels trading today after gaining as much as 4%. Over the past 52 weeks, shares of InBev, with a market cap of 26.42 billion euros, have traded between 40.100 euros and 68.97 euros.

Anheuser-Busch ((BUD)), a family business tracing its roots more than a century, saw its shares climbing by up to 3% in New York trading today. The share has reached a high of $67.55 in the last year and traded at a low of $45.55.

Anheuser-Busch also manufactures beverage cans, recycles aluminum cans for conversion into new aluminum sheet, manufactures labels, and operates rice milling and barley seed processing plants. In addition, Anheuser-Busch owns and operates theme parks.