ST. LOUIS -- Beer maker Anheuser-Busch Cos. Inc. announced late Wednesday that it has received an unsolicited, nonbinding proposal from Brussels, Belgium-based brewer InBev to acquire all of the outstanding shares of A-B for $65 per share in cash in a deal pegged at about $46.9 billion. A-B said that its board of directors will evaluate the proposal carefully and in the context of all relevant factors, including its long-term strategic plan.
In May, reports surfaced that InBev—formed by the 2004 merger of Belgium's Interbrew with Brazil's AmBev—might offer about $46 billion [image-nocss] for the company, added an Associated Press report.
InBev issued a statement that it has made a proposal to the A-B board to combine the two companies, forming the world's leading global brewer. The proposal to acquire all outstanding common shares of A-B for $65 per-share in cash represents an immediate premium of 35% over A-B's 30-day average share price prior to recent market speculation, and an 18% premium over A-B's previous all-time high of $54.97 achieved in October 2002.
The combination of A-B and InBev would create the global leader in the beer industry and one of the world's top five consumer products companies, said InBev. On a pro-forma basis for 2007, the combined company would generate global beer volumes of 460 million hectoliters, net sales of $36.4 billion, and EBITDA of $10.7 billion.
The proposal was sent to A-B's board yesterday, indicating that InBev would like to engage in a dialogue with the goal of consummating a friendly combination.
As part of its proposal, InBev said it envisions making St. Louis the headquarters for the North American region and the global home of the flagship Budweiser brand. In addition, InBev has proposed to name the combined company to evoke A-B's heritage, reflecting the strong history of its key brands. InBev would invite a number of A-B's directors to join the board of the combined company and would seek to retain key members of A-B's management team across the organization. Given the limited geographical overlap between the two businesses and the efficiency of A-B's brewery footprint in the United States, InBev would maintain all of A-B's U.S. breweries.
The combined company would be geographically diversified, with leading positions in key countries around the world and balanced exposure to developed and developing markets. A combination of A-B and InBev would result in significant growth opportunities from leveraging the companies' combined brand portfolio, including the global flagship Budweiser brand and international market leaders such as Stella Artois and Beck's, maximizing the combination's global distribution network and applying best practices across the new organization.
Commenting on the offer, Carlos Brito, CEO of InBev, said: "We have the highest respect for [A-B], its employees and its leadership, who have built the leading brewer in the U.S. and grown the iconic Budweiser brand. Together, we would draw on the collective expertise of both companies' management and employees. We also recognize the great contribution of [A-B's] wholesalers to the company's success and would work closely with them, under the three-tier system, to create even greater excitement in the marketplace around the brands of both companies. The combination will create a stronger, more competitive, sustainable global company which will benefit all stakeholders."
He continued, "InBev sees significant opportunities to internationalize [A-B's] key brands and would position Budweiser as the combined company's flagship brand, leveraging InBev's expansive international footprint. InBev has a history of successfully building brands around the world, which would complement the strength of [A-B's] brandbuilding in the U.S. The two companies already have a successful U.S. distribution partnership for InBev's European premium import brands including Stella Artois, Beck's and Bass. [A-B's] world-class sales and distribution system would continue to support the expansion of these brands in the U.S. market."
Added Brito, "We view this combination as a natural next step for both companies, who already enjoy successful partnerships in the U.S., Canada and South Korea. In Canada, both InBev and [A-B] have seen significant benefits from our existing relationship which spans almost 30 years, during which InBev has helped to make Budweiser the No. 1 beer in Canada with average annual volume growth of 7.2% since 1998. We also have great admiration for [A-B's] strategic partner, Grupo Modelo, and hope to work with them to find new opportunities to accelerate the development of the Grupo Modelo brands outside of North America."
Given the highly complementary footprint of the two businesses, synergies would largely be driven by sharing best practices, economies of scale and rationalization of overlapping corporate functions, said InBev.
In light of the limited overlap between the InBev and A-B businesses, InBev said believes that the proposed combination should not encounter any significant regulatory issues and expects that the proposed transaction could be completed promptly. The transaction will be financed with at least $40 billion in debt, and a combination of divestitures of noncore assets and equity financing.
Sources familiar with the situation told Reuters that InBev was close to securing a $50 billion financing package that would enable it to launch the takeover bid for A-B. A source said InBev, the brewer had held talks with banks JPMorgan Chase & Co. and Banco Santander SA about a financing package.
The A-B board said that it will review the merits of the proposal consistent with its fiduciary duties and in consultation with its financial and legal advisers. It will pursue the course of action that is in the best interests of A-B stockholders. The board expects to make its determination regarding InBev's proposal "in due course," it said.
InBev manages a segmented portfolio of more than 200 brands. This includes beers with global reach such as Stella Artois and Beck's, multicountry brands such as Leffe and Hoegaarden and many "local champions" such as Skol, Quilmes, Sibirskaya Korona, Chernigivske, Sedrin, Cass and Jupiler.
Based in St. Louis, A-B brews the world's largest-selling beers, Budweiser and Bud Light. It also owns a 50% share in Grupo Modelo, Mexico's leading brewer, and a 27% share in China brewer Tsingtao.
Click hereto view previous CSP Daily News coverage of the deal.
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