InBev, Anheuser-Busch shares rise on merger report

By Simon Rabinovitch and Philip Blenkinsop

LONDON/BRUSSELS (Reuters) - Shares in the world's top brewer InBev INTB.BR hit a record high on Thursday after a Brazilian newspaper reported the Belgium-based company was in merger talks with Anheuser-Busch Cos. Inc. BUD.N.

Shares in InBev, maker of Stella Artois, Beck's and Brahma, were at 53.05 euros, up 4.5 percent, at 1545 GMT, off a high of 55.70 euros.

Stock in Anheuser-Busch, which brews Budweiser and Michelob, was up 3.3 percent in early U.S. trading, having hit a two-year high of $52.25.

Valor Economico said talks between InBev and Anheuser-Busch were still at a preliminary stage, citing a source it described as close to three Brazilians on the InBev board.

The paper also cited an unnamed investment banker as saying a merger between the two had "big chances of happening one day".

Both InBev and Anheuser-Busch declined to comment.

One trader said that the report seemed tenuous but could not be discounted.

"What it could do is force the other players in the beverage sector to do deals, similar to what we've seen with tobacco consolidations," the trader said.

Other European brewers also rose on the report, with Heineken (HEIN.AS), Carlsberg (CARLb.CO) and SABMiller (SAB.L) up 2 percent or more. Scottish & Newcastle SCTN.L added 1 percent.

Valor said at the end of 2006 InBev's market cap at $40.3 billion was higher than $37.7 billion for Anheuser and cited the source saying this would give InBev the possibility of negotiating a merger with Anheuser in better conditions.

WORLD DOMINANCE

Analysts, however, questioned the value of a potential deal.

If size and image alone were decisive, it would make perfect sense. InBev is the world's largest brewer by volume, Anheuser the leader by sales.

"Global domination of the beer industry is a prime target for InBev," said Dresdner Kleinwort analyst Andrew Holland.

However, InBev would require synergy benefits and cost savings to justify such a move.