INBEV is to buy Anheuser-Busch Cos for US$52 billion, putting the maker of Budweiser beer under Belgian control after almost 156 years as a family-run company.
The US$70-a-share transaction ends a month of court fights and public denunciations as InBev tried to acquire the St Louis-based beer maker in a hostile takeover. Belgium-based InBev lifted its initial offer by 7.7 percent and agreed to rename itself Anheuser-Busch InBev, the brewers said yesterday.
InBev now faces the task of persuading local labor leaders, politicians and customers to support the combination, which adds the 132-year-old Budweiser brand to Germany's Beck's lager and Bass ale in the UK. The Belgian company will overtake SABMiller as the world's largest beer maker by volume. Members of the founding Busch family, including Chief Executive Officer August Busch IV, initially opposed a sale.
Emotional attachment
"This is about giving InBev a United States presence, and this is the most effective way they can see to achieve that," said Grant Saligari, a beverage industry analyst at Commonwealth Securities in Sydney. "Consumers are very emotionally attached to their beers. A peaceful deal helps maintain that."
The bid follows SABMiller's agreement to combine its US businesses with Molson Coors Brewing as US industry sales approach US$100 billion, according to Euromonitor.
InBev Chief Executive Officer Carlos Brito will become the combined company's CEO, and August Busch IV and another current or former director of the US company will join the board.
InBev rose 1.87 euros (US$2.97), or 4.2 percent, to 46.37 euros at 9:56am in Brussels trading. Anheuser-Busch, which climbed 26 percent after reports of InBev's planned bid in May, gained US$1.71, or 2.6 percent, to US$68.21 in Frankfurt trading.
"You really couldn't have wished for a much better deal," said Tom Pirko, president of Bevmark LLC, a consulting firm in Buellton, California. "Shareholders thought it would be a hostile bid and the company would be wrecked."
Pirko's firm has analyzed the beverage industry for 30 years.
Grupo Modelo SAB, the Mexican brewer that's half-owned by Anheuser-Busch, said in a separate statement that it hasn't yet decided whether it will stay with InBev after the sale is completed. Modelo said it has a right under Mexican law to decide on its partner and has been in talks with InBev.
At US$70 a share, InBev is paying about 11 times Anheuser's 2009 projected earnings before interest, taxes, depreciation and amortization, based on analysts' estimates compiled by Bloomberg News. SABMiller paid about 14 times Ebitda for Royal Grolsch NV last year, according to Petercam SA's Kris Kippers.
InBev said the purchase will be "neutral" to 2009 earnings per share and should boost EPS from the following year. The company expects cost savings of US$1.5 billion annually by 2010, and it will keep all of Anheuser's US breweries open.
Billionaire investor Warren Buffett's Berkshire Hathaway is Anheuser-Busch's second-largest shareholder, with a 5-percent stake. Barclays owned 6.1 percent of the US brewer as of March 31.
Flagship brand
InBev's Brito said the combined company's more than US$36 billion in annual sales and 12 billion gallons of shipments will allow the negotiation of better terms from suppliers as expenses soar for barley, hops, electricity and metal for beer cans.
"Now with Budweiser as our global flagship brand, that'll give us a great platform to develop that brand together with Beck's and Stella Artois," Brito said yesterday.
InBev will finance the purchase with US$45 billion of debt, including US$7 billion of bridge financing for divestitures of "non-core" assets from both companies. The brewer said it also received commitments for as much as US$9.8 billion in bridge financing to provide it with flexibility on the timing of a stock sale after the purchase.
InBev's lenders are Banco Santander, Deutsche Bank, Barclays, JPMorgan Chase, Royal Bank of Scotland, BNP Paribas, Fortis, ING Groep, Bank of Tokyo-Mitsubishi and Mizuho Corporate Bank.
InBev, which traces its roots to 1366, took its current form in 2004, when Interbrew SA bought Sao Paulo's Cia de Bebidas das Americas, or AmBev, in a US$11-billion transaction.
Through 20 years of acquisitions, InBev expanded from family-owned Flemish beers to surpass Anheuser-Busch in sales while dominating Latin America.
The Belgian company will get control of half the US beer market and will grow in China, where Anheuser owns 27 percent of Tsingtao Brewery.