Budding bid for Anheuser-Busch

Rumours are rife that Inbev, the world’s number one brewer by volume, is considering making a $46 billion unsolicited bid for Anheuser-Busch, the largest brewer by value.

Although no formal approach has been made, the world of beer is working itself into a froth over the $65 per share offer. A-B CEO August Busch IV has expressed resistance to the deal but other family members appear more open-minded.

Another major hurdle to tabling a bid is the huge debt required to fund the deal. At a time when credit is hard to come by, InBev may need as much as $50bn-$60bn to cement the deal with an additional rights issue of approximately $23.5bn to pay down debt.  InBev is thought to be working with JPMorgan and Santander to negotiate the debt package.

According to the Financial Times, Diageo and Heineken are InBev’s likely rivals in a bid for A-B, with the former standing to benefit most from the brewer’s additional distribution channels.

But InBev does not appear to have completely ruled out other brewers, judging by SABMiller’s rise in share price. A-B distributes some InBev beers in the US while InBev distributes Budweiser in Canada. A deal between InBev and another brewer could result in significant breakage costs for dismantling these arrangements.

Fionnuala Synnott, 28/05/08