Brewer Bids $46 Billion for Anheuser-Busch

One of the nation’s most prominent family-run companies, Anheuser-Busch, formally became the target of a $46.4 billion unsolicited takeover offer from InBev of Belgium on Wednesday.

A deal, if reached, would combine Anheuser-Busch’s best-selling Budweiser and Bud Light brands with InBev’s Stella Artois, Beck’s and Bass and would create the world’s largest brewer, with distribution channels around the globe.

InBev’s bid is likely to set off a bitter battle for control of Anheuser-Busch, based in St. Louis, which has been led by the Anheuser and Busch families for 148 years. The company, led by a scion of the Busch family, August A. Busch IV, has signaled that it will fight a takeover. In recent weeks, in anticipation of InBev’s bid, privately called Project Aluminum, Anheuser-Busch has hired an army of bankers, lawyers and other advisers to help it mount a defense.

The battle may stir a national debate filled with patriotic fervor over a company ingrained in the American consciousness. Anheuser-Busch spends more money than any other advertiser during the Super Bowl each year; last year alone, it spent $23.9 million, according to TNS, a market research company.

The bid could also put Warren E. Buffett, Anheuser-Busch’s second-largest shareholder after August A. Busch III, a former Anheuser-Busch chairman and chief executive, in the middle of a struggle.

Gov. Matthew R. Blunt of Missouri said in a statement Wednesday that he opposed any sale. “Today’s offer to purchase the company is deeply troubling to me,” he said, adding that he was directing the state’s department of economic development to explore ways to keep Anheuser-Busch in St. Louis.

Two InBev directors approached Mr. Busch about a deal during a secret meeting in Tampa, Fla., on June 2.

The meeting, which people who were briefed on it described as “polite and short,” was a prelude to InBev’s formal offer, made in a letter to Mr. Busch and Anheuser-Busch’s board. InBev said it hoped to reach a friendly deal and, in that spirit, said that it hoped to “keep the contents of this letter private.” Within hours, however, word had spread across Wall Street, and Anheuser-Busch chose to make the bid public.

For weeks, hedge funds and arbitrageurs have been buying up shares of Anheuser-Busch, pushing its stock up more than 11 percent in the last two weeks.

Shares of Anheuser-Busch closed on Wednesday at $58.35, but rose as much as 10 percent in after-hours trading.

In a brief statement, Anheuser-Busch said its board would review the proposal and make a decision “in due course.”

Consolidation has been the watchword in the beer industry for years, as breweries have sought economies of scale. The world’s two largest brewers are the products of trans-Atlantic deals struck over the past decade: SABMiller, from South African Breweries’ 2002 purchase of Miller Brewing, and InBev, from the 2004 union of Belgium’s InterBrew and Brazil’s AmBev.

The rise in the prices of grain and other ingredients has added extra impetus to merger efforts.

But domestic brewers have struggled in recent years as their customers drift toward wine and spirits, as well as craft beers and imports. That has tempted the international brewers. SABMiller and Molson Coors will combine their operations in the United States, forming a formidable rival to Anheuser-Busch.

One of Anheuser-Busch’s potential countermoves would involve buying the 50 percent of Mexico’s Grupo Modelo that it does not already own. That would raise Anheuser-Busch’s price tag, potentially deterring a suitor.

InBev has been planning its bid for Anheuser-Busch for months, according to people briefed on the matter. Despite a relatively barren environment for deal financing, the Belgian company has already lined up lender commitments from eight international banks, including JPMorgan Chase, Banco Santander of Spain and Deutsche Bank of Germany.

In his letter to Mr. Busch, InBev’s chief executive, Carlos Brito, took pains to emphasize that he would make several concessions to reach a friendly deal. He proposed keeping St. Louis as the new company’s headquarters, retaining the Anheuser-Busch name in some way and making Budweiser its flagship brand.

“We have the highest respect for Anheuser-Busch, its employees and its leadership, who have built the leading brewer in the U.S. and grown the iconic Budweiser brand,” Mr. Brito said in a statement.

A deal would probably remove Anheuser-Busch from the hands of the Anheuser and Busch families. Mr. Busch, 43, is the fifth generation of the Busch family to run the company.

Mr. Busch is likely to feel great pressure to strike a deal. Anheuser-Busch’s stock has been stagnant for years, as the company sought to find new avenues for growth.

InBev’s interest has even created a divide within the Busch family. Adolphus A. Busch IV, an uncle to Mr. Busch, has said that any decision about the company should be based on shareholder value, not nostalgia.

Anheuser-Busch lacks some common defenses against takeover offers. Its board is no longer staggered, meaning all its directors are up for re-election in any given year. And the Busch family does not control the company through supervoting shares, as is the case with some other family businesses that are publicly held.

[Via NY Times]