A-B to See Hostile Takeover?

InBev also eying SABMiller purchase, according to reports

Steve Holtz, Editor in Chief, CSP Daily News

ST. LOUIS -- Even as Anheuser-Busch Cos. refused to acknowledge reports of a $45 billion buyout bid for the beer-brewing company, one thing became clearer yesterday, InBev NV, the rumored bidder, is out to become the largest beer company in the world. This became obvious when, just days after the A-B reports surfaced, newspapers began reporting that InBev had, in fact, considered bidding on SABMiller before turning its attention to A-B.

A-B and InBev both have claims to the world beer-brewing title, A-B by value and InBev by volume, according to JustDrinks.com. And SABMiller, following [image-nocss] on its recent merger with MolsonCoors, is a healthy third-place contender. But where the chips fall in the current acquisition climate will decide just who rules the international beer-brewing roost.

CSP Daily News reported on the likelihood of an InBev/A-B purchase in July 2007, noting speculation from beer-industry analysts, particularly those from CitiGroup, which said at the time that a combined company would be responsible for nearly double to volume of product sold by SABMiller. Citigroup also estimated the synergies of the two companies would save the new entity between $4 million and $10 million.

Other analysts reported this week, however, that even more synergies are needed to make the deal worthwhile.

Calling a bid for A-B from InBev "imminent," Mark Swartzberg of Stifel Nicolaus, wrote Friday, "We conclude—again, on a preliminary basis—that $1.4 billion of annual cost synergies are necessary to make an all-debt-financed $65-per-share bid earnings neutral to InBev shareholders in year one."

Most analysts and reports also predict A-B CEO August Busch IV will fight the takeover.

On Tuesday, one Busch family member, Adolphus Busch IV, told The Wall Street Journal that he and some other family members are open to the idea of A-B and InBev sitting down to discuss a possible deal. "There are members that absolutely want it to stay status quo," Adolphus Busch told the newspaper. "There are others that say they want to see some kind of change to enhance shareholder value."

An offer by InBev would put the 43-year-old August A. Busch IV, who assumed the top spot at A-B just 18 months ago, in a tough spot, according to the report. If Anheuser is sold to InBev, he could be remembered as the member of the founding Busch family who let the St. Louis icon slip into foreign hands. The Busch family controls less than 4 percent of the stock, so even if a majority opposed the deal, it can't block it.

Thus, analyst Bill Pecoriello of Morgan Stanley said a hostile takeover isn't out of the question.

"We believe any deal between InBev and [A-B] would be hostile as we don't see [A-B] agreeing to a merger of equals. We believe [A-B] will not go down without a fight (i.e., demonstrate it can go after cost saves itself and/or make acquisition), which could raise the required takeout price to $70+/share," he wrote in a report yesterday. "We believe that InBev would earn unattractive returns at any price at/above $65.… On our calculations, it is possible to finance the transaction, but it would require substantial issuance of debt and equity."

JustDrinks.com, meanwhile reported yesterday that should the A-B purchase attempt fall through the cracks, InBev is prepared to return its attention to a purchase of South Africa's SABMiller.

None of the entities involved in these numerous reports commented on the rumors. Belgium-based InBev is brewer of Beck's and Stella Artois, among many other brands. InBev and A-B already share some ties. InBev distributes Budweiser in Canada, and A-B imports InBev beers such as Stella Artois and Bass. Also in 2006, InBev sold its Rolling Rock brand to A-B for $82 million.

A-B stock stood at $56.82 a share yesterday afternoon, a more than 20-year high for the company's stock.

Steve Holtz, CSP/Winsight By Steve Holtz, Editor in Chief, CSP Daily News
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