Friendly InBev, Anheuser deal seen soon: sources

NEW YORK/PHILADELPHIA (Reuters) - InBev NV INTB.BR sweetened its takeover offer for rival Anheuser-Busch Cos Inc (BUD.N) to $50 billion, finally luring the U.S. brewer into talks over a friendly deal, sources familiar with the situation said.

After a month of mounting tensions, Belgian-Brazilian InBev has offered $70 per share for the maker of Budweiser, up from the $65 per share, or $46.3 billion, it proposed a month ago, sources said. They added that Anheuser's board could accept the new bid as soon as this weekend.

Yet they cautioned that the ultimate timing and price of any potential deal may change since negotiations could break down at any time.

Shares of both brewers jumped more than 7 percent on Friday.

The new offer reflects a premium of 33 percent over Anheuser's closing price on May 22, the day before media reports of takeover talks surfaced.

As it sweetened its offer, InBev, which brews Stella Artois and Beck's, also moved to quash concerns over its financing by launching a $45 billion syndicated loan backing the proposed takeover, banking sources told Reuters LPC on Friday.

The sources said the loan's pricing and fees were among the highest seen on an investment-grade acquisition loan, making this a "must-do deal" for banks, which have been hurt as credit market turmoil has stymied the flow of deals.

The two brewers had grown increasingly contentious since Anheuser rejected the initial bid two weeks ago, with InBev seeking to replace Anheuser's board and Anheuser suing InBev for making "false and misleading statements."

Helping to push the two sides to the negotiating table are signs that some big investors in Anheuser, including second-largest shareholder Berkshire Hathaway Inc (BRKa.N), were leaning toward backing a deal with InBev, according to a report in The New York Times.

Analysts have said a seal of approval from billionaire investor Warren Buffett, who runs Berkshire Hathaway, would probably influence other shareholders.

Berkshire, which owns a 5 percent stake in the brewer, did not return a call seeking comment but Buffett told Reuters on June 25 that he had yet to take a position on InBev's offer.

Some shareholders, including Adolphus A. Busch IV, an uncle of Chief Executive August A. Busch IV, said they supported a takeover, even at $65 a share.

Since InBev had a good chance of succeeding if it went directly to shareholders in a tender offer, Morningstar analyst Ann Gilpin said a takeover seemed inevitable.

"Either it was going to be hostile at $65 or friendly at a higher price," she said.

And a friendly deal would behoove both sides, said Tom Pirko, president of beverage industry consulting firm Bevmark.

"Not only does it (a contentious takeover) distress the asset," Pirko said, referring to distrust and resentment on the part of employees and others that could hurt future business. "But it keeps people awake all night as they try to deal with it. It's like getting a divorce. It's a nasty process."

InBev and Anheuser-Busch declined to comment.

GOOD FOR BOTH SIDES

Anheuser rejected InBev's bid and outlined an alternative plan to deliver more than $1 billion in annual savings, adding that it would cut jobs, raise prices and boost share buybacks.

But the St. Louis-based brewer left the door open to a higher bid, which Gilpin said would be even more compelling to Anheuser investors, whose shares have languished for five years.

"The only thing that concerns me is that the deal goes through fast and I get my money," said Stephen Jarislowsky, chairman and CEO of Jarislowsky, Fraser Ltd. As of March 31, the Canadian investment firm owned 1.7 million Anheuser shares.

Credit Suisse analyst Carlos Laboy said a bid of $70 or more seemed "entirely reasonable given Anheuser's low-growth outlook and the high execution risk around the new cost-cutting plan."

At $70 per share, it will take InBev close to four years to cover its costs of capital, instead of three years under the initial bid, according to Trevor Stirling, an analyst with Sanford Bernstein.

"I think $70 is still a good deal for InBev and its shareholders," Stirling said. "A lot depends on the scale of savings they can achieve and the coupon on the debt. I think $75 would have been too much."

Pirko said $70 was a fair price for Anheuser, which owns half of Mexico's Grupo Modelo (GMODELOC.MX) and 27 percent of China's Tsingtao Brewery Co Ltd (600600.SS), though he guessed there were Anheuser insiders who believe the brewer could hold out for more.

He said $70 was a good deal for InBev CEO Carlos Brito, who would still get the asset he covets, and the financing.

"You can look out at the water and see an island arising, and that island is where there's dry land. In this particular deal, it seems to me that dry land is $70 a share," he said.

Anheuser shares closed up 8.6 percent, or $5.29, at $66.50 on the New York Stock Exchange. In Brussels, InBev shares closed up 7.4 percent at 44.50 euros.

(Additional reporting by Aarthi Sivaraman in New York, Philip Blenkinsop in Brussels and Tessa Walsh in London; Editing by Mark Porter, John Wallace, Lisa Von Ahn, Phil Berlowitz, Gary Hill)