InBev follows Mars in securing big funding

PHILADELPHIA (Reuters) - Beer brewer InBev NV and candy company Mars Inc have proven that there's money available for the right deal and the right brand names.

Despite tight credit markets and fears of looming write-downs at Wall Street banks, InBev INTB.BR secured $40 billion in funding for its bid for U.S. beer brewer Anheuser-Busch Cos Inc (BUD.N).

Meanwhile, Mars recently agreed to buy Wm Wrigley Jr Co WWY.N with the help of $17.2 billion in funding from JPMorgan Chase & Co (JPM.N) and Goldman Sachs Group Inc (GS.N), as well as about $6.5 billion in help from billionaire Warren Buffett.

"These are recession-resistant businesses with steady cash flow and bankable names," said one arbitrageur who declined to be named.

"The 'sin stocks' do well even in a down market. People don't cut back on candy and beer when times are tough. That's the indulgence that people can afford," the arbitrageur said.

InBev, the brewer of Stella Artois and Beck's, said it would finance its $46.3 billion bid for Anheuser-Busch with at least $40 billion in debt and a combination of non-core asset sales and equity financing.

"This is going to be one of the top five global consumer companies. People want to hold the debt," said a source familiar with the InBev offer. "For the right deal in the right industry, banks will come up with the money."

Although borrowing costs are now higher than they were during the leveraged buyout bubble last year, that has not deterred some companies from making strategic acquisitions, investment bankers said.

"InBev is an easy company to finance; it's massively strong and has cash flow everywhere," a second source familiar with the InBev offer said.

InBev said it had funding from Banco Santander SA (SAN.MC), Barclays Plc (BARC.L), BNP Paribas SA (BNPP.PA), Deutsche Bank AG (DBKGn.DE), Fortis NV FOR.BR, JP Morgan and Royal Bank of Scotland Group Plc (RBS.L).

"A year ago it would have taken four banks to finance it. The only difference is that now it takes eight," the source said.

Merrill Lynch analysts said InBev's offer could be financed completely by debt without any need to raise equity. That helped boost shares of InBev on Thursday.

Shares of InBev closed at 50.21 euros, up 6.2 percent. The stock had been hurt in recent weeks amid investors' concerns that InBev would have to raise as much as $17 billion in a rights issue to help finance the deal, which would have diluted the stock.

STRONG NAMES GAIN SUPPORT

InBev and Mars are not alone in securing mega-billion funding packages. French utility Electricite de France SA (EDF.PA) garnered funding for its $21.4 billion bid for British Energy Group Plc BGY.L, and France Telecom (FTE.PA) got support for its $41 billion offer for Nordic company TeliaSonera AB (TLSN.ST), which was rejected as too low.

"These types of companies will always have access to the loan market with a strong and loyal bank base," said a third source familiar with the InBev offer.

"Banks will support large debt amounts. No one's going to take a loss on InBev; these are not names that are going to default," the third source said.

In addition to backing InBev's offer for Anheuser-Busch, JP Morgan also backed Mars's planned takeover of Wrigley.

JP Morgan has weathered the damage caused by the U.S. subprime crisis better than many of its rivals and absorbed rival Bear Stearns. JP Morgan and other lenders gain lucrative fees from funding these mergers, bankers noted.

The diversity of InBev's funding pool shows the presence of Santander and other regional banks, illustrating how banks in emerging markets and continental Europe have available funds due to lower exposure to financial turmoil in the U.S., investment bankers said.

Of course, not every proposed acquisition can secure funding.

The loan for Pernod Ricard SA's (PERP.PA) purchase of Sweden's Vin & Sprit VSG.UL was cut and restructured after a failure to meet sales targets. The buyout of radio station operator Clear Channel Communications Inc (CCU.N) also was renegotiated in a legal settlement between its buyers and several bank lenders.

Meanwhile, the banks financing the $6.1 billion leveraged buyout of casino and racetrack operator Penn National Gaming Inc (PENN.O) also are itching to renegotiate terms of that deal, media reports have said.

(Additional reporting by Eleanor Wason in Milan, Tessa Walsh and David Jones in London, editing by Gerald E. McCormick)

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