InBev Agrees to Buy Anheuser-Busch for $52 Billion (Update3)
By Duane D. Stanford
July 14 (Bloomberg) -- InBev NV will buy Anheuser-Busch Cos. for $52 billion, putting the maker of Budweiser beer under Belgian control after almost 156 years as a family-run company.
The $70-a-share transaction ends a month of court fights and public denunciations as InBev tried to acquire the St. Louis-based beermaker in a hostile takeover. Leuven, Belgium- based InBev lifted its initial offer by 7.7 percent and agreed to rename itself Anheuser-Busch InBev, the brewers said today.
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 U.K. The Belgian company will overtake SABMiller Plc as the world's largest beermaker by volume. Members of the founding Busch family, including Chief Executive Officer August A. Busch IV, initially opposed a sale.
``This is about giving InBev a U.S. presence and this is the most effective way they can see to achieve that,'' said Grant Saligari, a beverage industry analyst at Commonwealth Securities Ltd. 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 U.S. businesses with Molson Coors Brewing Co. as U.S. industry sales approach $100 billion, according to Euromonitor Plc.
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 U.S. company will join the board.
Anheuser's Gains
InBev rose 1.87 euros, or 4.2 percent, to 46.37 euros at 9:56 a.m. in Brussels trading. Anheuser-Busch, which climbed 26 percent after reports of InBev's planned bid in May, gained $1.71, or 2.6 percent, to $68.21 in Frankfurt trading.
The transaction will be the biggest cash takeover on record and second among U.S. consumer-products acquisitions to Procter & Gamble Co.'s purchase of Gillette Co. for $57 billion in 2005.
``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.
Buffett's Stake
At $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. 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 $1.5 billion annually by 2010, and it will keep all of Anheuser's U.S. breweries open.
``In InBev already today, there's a mix of a lot of geography and cultures, so why would adding a North American operation not work?'' said Wim Hoste, a Brussels-based KBC Securities analyst, in a Bloomberg Television interview.
Billionaire investor Warren Buffett's Berkshire Hathaway Inc. is Anheuser-Busch's second-largest shareholder, with a 5 percent stake. Barclays Plc owned 6.1 percent of the U.S. brewer as of March 31, according to data compiled by Bloomberg.
Cost Cuts
InBev's Brito said the combined company's more than $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 today in an interview broadcast on the Cantos Web site.
InBev may have trouble lowering costs given potential resistance from Anheuser-Busch's unions and the low market overlap between the two companies, according to Wachovia Securities Inc. analyst Jonathan Feeney.
The Belgian company, the maker of Stella Artois and Leffe Belgian ales, hired Lazard Ltd., JPMorgan Chase & Co., Deutsche Bank AG and BNP Paribas SA to advise it in the month-long fight. Anheuser-Busch's advisers include Goldman Sachs Group Inc., Merrill Lynch & Co., Citigroup Inc., and Moelis & Co.
Bridge Loans
InBev will finance the purchase with $45 billion of debt, including $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 $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 SA, Deutsche Bank, Barclays Plc, JPMorgan Chase, Royal Bank of Scotland Group Plc, BNP Paribas SA, Fortis, ING Groep NV, Bank of Tokyo-Mitsubishi UFJ and Mizuho Corporate Bank Ltd.
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 an $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 U.S. beer market and will grow in China, where Anheuser owns 27 percent of Tsingtao Brewery Co., the country's second-largest brewer.
The U.S. brewer spurned InBev's original $46.3 billion proposal on June 26 as ``financially inadequate,'' while keeping the door open for a higher offer from InBev or another suitor. That rejection came three hours after InBev made its bid hostile and announced plans to fire the brewer's directors.
The Busch family, which doesn't own enough stock to block a bid, was split over the initial offer. August Busch IV said earlier this year that the company wouldn't be sold ``under my watch,'' while an uncle, Adolphus Busch IV, urged Anheuser's board to accept the InBev proposal.
To contact the reporters on this story: Duane D. Stanford at dstanford2@bloomberg.net
Last Updated: July 14, 2008 04:13 EDT |
