PHILADELPHIA/BRUSSELS (Reuters) - Belgian brewer InBev NV is working on a $46 billion bid for Anheuser-Busch Cos Inc, according to a source familiar with the situation.
News of a possible deal, which would be the largest in alcoholic drink history, sent Anheuser shares up as much as 10 percent on Friday while shares of InBev closed down 2.9 percent at 48.88 euros.
The source said an offer was not certain.
The news was first reported by the Financial Times, in its Alpahville blog. The report cited sources saying the approach was expected to be pitched at $65 a share but while extensive work was being carried out, InBev was not about to “push the button.”
One analyst in New York said a deal could come as soon as this weekend.
“The fact of the matter is, if they want to move, they’ve got to move now,” said Robbert Van Batenburg, head of research with Louis Capital Markets. He said clearance to combine two of the world’s top brewers may be harder with a new U.S. president, since all the candidates are less friendly to the business community than current U.S. President George W. Bush.
The FT report said a financing package of $50 billion had been provisionally arranged through JPMorgan and Santander and that the bid had been discussed at an InBev board meeting on April 28 and at a meeting on Thursday.
The report also said InBev is considering a hostile bid if Anheuser management refuses friendly talks.
Officials from InBev, Anheuser and JPMorgan all declined to comment.
A deal at $65 a share represents a 23.6 percent premium over Anheuser’s closing stock price of $52.58 on Thursday, the day before the report. The stock closed up 7.7 percent at $56.61 on Friday.
Talk of a possible bid by InBev — brewer of Stella Artois, Beck’s and Brahma — for the U.S. maker of Budweiser and Michelob heated up in the past week after surfacing several times before. A Brazilian newspaper reported preliminary merger discussions as far back as February 2007.
“Anheuser-Busch shares and options have been active throughout the week due to rumors of a takeover,” said William Lefkowitz, options strategist at New York brokerage firm vFinance Investments.
But Friday’s new details prompted renewed interest in the brewer’s call options, which give investors the right to buy shares. Roughly 213,000 calls versus 32,000 puts traded during the first half of the day, 8 times the normal level, according to option analytics firm Trade Alert.
Wachovia analyst Jonathan Feeney said in a research note that Anheuser’s limited commentary on the subject suggested a strong desire to remain independent.
He also said a $65 per share bid valued Anheuser at about 13 times annual earnings before interest, taxes, depreciation and amortization for the domestic beer business.
“Not an overly compelling price, in our view, but probably a fair take-out price for a 22-percent margin business, with little, if any, volume growth,” Feeney wrote.
Credit Suisse analyst Carlos Laboy echoed that view, but noted that a hostile bid would have to be higher.
Laboy also said Anheuser could, in defense, seek to make itself larger by buying the other half of Mexican brewer Grupo Modelo that it does not own, while Van Batenburg said there was a way Anheuser could return its stake to Modelo, which would make it a less attractive target.
Gerard Rijk, a beverage analyst at ING in Amsterdam, said he felt the deal was a question of when, rather than if.
“The consolidation has to continue. There are strategic synergies in North America and China,” he said.
InBev, formed from the 2004 merger of Belgium’s Interbrew with Brazil’s AmBev, has a fraction of the U.S. market but very mature businesses in western Europe. It also has growth in Eastern Europe, Asia and Latin America, notably in the key market of Brazil.
Anheuser dominates the United States and also has an equity stake in China’s Tsingtao. But it has struggled recently as U.S. consumers abandon domestic beer for wine, spirits, foreign beers or small-batch craft brews.
The beer industry is experiencing a wave of consolidation, with SABMiller Plc and Molson Coors Brewing Co aiming to combine their U.S. units and Scottish & Newcastle agreeing to be broken up by Carlsberg A/S and Heineken
Despite these hurdles, antitrust lawyer Michael Knight of Cooley, Godward, Kronish LLP predicted an InBev/Anheuser deal had a “pretty decent chance” of being approved this year if the companies get the paperwork to U.S. regulators quickly.
But will the deal lead to better Budweiser? “Let’s hope the Belgian secrets can be passed on,” said Knight.
(Writing by Martinne Geller)
Additional reporting by Mark Potter in London, Julien Ponthus and William Schomberg in Brussels, Doris Frankel in Chicago and Diane Bartz in Washington; Editing by Mike Elliott, Greg Mahlich, Tim Dobbyn, Phil Berlowitz