InBev Finally Wins Over Anheuser-Busch with Higher Bid

By Jennifer Yousfi

In a move that surprised investors, Anheuser-Busch Companies Inc.’s (BUD) board voted to end more than 150 years as a family-controlled company, accepting a $70-per-share bid from Belgium’s InBev NV (INBVF.PK) in a deal that puts a $52 billion price tag on the iconic American brewer.

St. Louis-based Anheuser-Busch - which had appeared to be digging in for a long battle - and InBev approved the all-cash deal, according to a joint statement released Monday.

Anheuser-Busch’s popular Budweiser and Bud Light beers will join an InBev stable that includes such well-known brands as Stella Artois, Beck’s, and Brahma. The resultant merger will produce the largest beermaker by volume, supplanting the current title-holder, Britain’s SAB Miller PLC (SBMRY.PK).

"Together, Anheuser-Busch and InBev will be able to accomplish much more than each can on its own," InBev Chief Executive Officer Carlos Brito, who will helm the new company, said in a joint statement. "We have been successful business partners for quite some time, and this is the natural next step for us in an increasingly competitive global environment."

The takeover battle had been shaping up in both the boardroom and the courtroom since InBev launched its original $46 billion offer for Anheuser-Busch back in May. Fierce opposition from the board, led by Chief Executive Officer August Busch IV, was finally overcome by InBev’s bid increase of 7.7% and the Belgian brewer’s agreement to name the newly formed global entity Anheuser-Busch InBev.

"This is about giving InBev a U.S. presence and this is the most effective way they can see to achieve that," Grant Saligari, a beverage industry analyst at Commonwealth Securities Ltd. in Sydney, told Bloomberg News. "Consumers are very emotionally attached to their beers. A peaceful deal helps maintain that."

The Mexican Stumbling Block?

While Anheuser-Busch and InBev management might all be in agreement, there are still a few snags that could derail the deal. First, Anheuser-Busch shareholders have to approve the deal. That vote will probably come in about two to three months time. 

And while it’s unlikely to derail the planned merger, the U.S. Congress could get involved if there is an antitrust angle, or if a particularly "patriotic" senator, such as Senator Claire McCaskill [D-MO], has reservations about selling the 150-year-old American giant to foreign investors.

However, the biggest hurdle could come from Grupo Modelo SA de CV (GPMCF.PK), the Mexico-based maker of Corona beer that is half-owned by Anheuser-Busch. 

In a statement released during Monday’s early morning hours, Modelo asserted that it "has certain rights with respect to the potential transaction between InBev and Anheuser-Busch, including a consent right," The New York Times reported.

Modelo is referring to its right of first refusal if its shares, 50% of which are owned by Anheuser-Busch, are sold. There also is a provision in Modelo’s contract with Anheuser-Busch that restricts the American brewer from selling Modelo’s shares to a competitor - which InBev clearly is.

Modelo is currently in talks with InBev and most analysts feel the Mexican and Belgian brewers will be able to come to an amicable agreement.

"If I had to make a prediction, I would guess that after a relatively short period of time [Modelo is] going to accept the new status quo, which in some ways is the old status quo," Steve Dixon, manager of Global Beverage Fund at Arnhold & S. Bleichroeder Advisers LLC in New York, told Reuters.

Aneheuser-Busch and InBev Merger Just One of Many

This merger is the latest in a string of consolidations in the largely mature global beverage industry, as skyrocketing grain costs and softening economies have led struggling brewers to seek economies of scale. Two of the largest brewers, InBev and SAB Miller, are themselves creations of mergers that took place within the past 10 years, The New York Times reported.

In January, Carlsberg A/S and Heineken N.V. (HINKY.PK) agreed to buy Scottish & Newcastle PLC for $15.4 billion. Late last year, British-owned SAB Miller PLC and Canada’s Molson Coors Brewing Co. (TAP), agreed to merge their U.S. brewing operations.

Once InBev acquires Anheuser-Busch, it will leave The Boston Beer Co. Inc. (SAM), maker of the popular Samuel Adams beer brand, one of the last large domestic brewers still under U.S. ownership.

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