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Monday, May 26, 2008

Beer Merger of the Century Could be On Tap

Rumors of an attempt by Belgian beer giant InBev to acquire Anheuser-Busch have been around for months, but now it looks like a potential bid might be just days away.

If InBev could pull off the deal it would create a massive $100 billion beer conglomerate with leading brands in most of the major beer drinking countries in the world. According to The Telegraph newspaper in London, InBev is working with the investment bank Lazard on a plan to raise $46 billion to make a bid for the brewer of Budweiser, Michelob and Natural Light.

Part of the plan might involve InBev selling off some assets or brands to create a funding pool. InBev brands include Stella Artois, Becks, Brahma, Labatt's and Hoegaarden, among others.

The InBev Board of Directors is schedule to meet this week to discuss the plan and could authorize a bid. While the Busch family is said to be preparing plans to ward off the bid, A-B is a publicly traded company and several major shareholders will likely push for the company to at least listen to offers. Barclays in the U.K. and Berkshire Hathaway, controlled by Warren Buffett, together own more than 11 percent of A-B. Shareholders can force consideration of a bid if 25 percent vote for a special meeting. Shares in the St. Louis company were trading at a 52-week high of $58 at the end of last week. While no formal offer has been made, the number floating around about the InBev bid is that it could be for $65 a hare.

A takeover by InBev has far reaching implications for the world beer market. A-B has made major investments in foreign brewers in recent years as it looks for growth. The company holds a 27 percent stake in Tsingtao in China and owns 50 percent of Grupo Modelo in Mexico, which brews Corona. Some reports suggest that one tactic A-B may use to fight off the InBev bid is to acquire more companies or a greater share of some of the companies it already has an interest in so that it can drive up the price InBev would need to pay.

Other reports suggest that once InBev has raised the funding for the deal, it will not want to go home empty handed from its shopping spree. If A-B fights off a bid, InBev could turn its attention to other brewers with one likely target being SABMiller. The Financial Times said that deal would be more complicated because SABMiller is still waiting for regulatory approval of its U.S. merger with units of Molson Coors Brewing.

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