Four weeks of holding out and playing hardball with legal maneuvering may be paying off for Anheuser-Busch BUD shareholders as the brewer's Belgian suitor InBev has upped its all cash buyout proposal to $70 a share.
Anheuser-Busch and InBev are meeting with legal and financial advisors in New York Friday about the sale, says a person familiar with the talks who declined to be identified because the talks could still fall through. Meetings to hammer out details such as top management, new company name and layoffs are expected to last through the weekend with plans to announce a deal on Sunday, says this person.
"It is our policy to not confirm, deny or speculate on rumors of potential investments, acquisitions, mergers, new business partnerships or other transactions," says W. Randolph Baker, Anheuser-Busch chief financial officer.
InBev had made a proposal to Anheuser-Busch CEO August Busch IV on June 11 for an all-cash buyout valued at $46 billion, a 30% premium over what A-B's stock had been trading at for the 30 day average leading up to the offer.
A-B snubbed the offer two weeks later saying it did not provide enough value to shareholders based on its leading position in the U.S. and the company's iconic brands. A-B has about 48% of the $90 billion U.S. market, the world's biggest, with its Bud Light, Budweiser, Michelob and Rolling Rock brands.
Wall Street applauded the likelihood of a A-B deal with InBev. A-B's stock jumped more than 8% Friday to close at $66.50, amid reports that a deal was close to being final despite a courtship that included lawsuits and move by InBev to replace A-B's board.
"It really all about the money despite the flag waving and posturing," says Juli Niemann, an analyst with Smith Moore & Co. in St. Louis. "Getting a little more on the table is getting everyone to be friendlier."
A merger between the two would create the world's largest brewery with worldwide volume of 357 million barrels and $36 billion in sales surpassing the now number one, SABMiller with more than 200 million barrels and $21.4 billion in revenue. A month ago SABMiller received regulatory clearance to combine its U.S. operations with MolsonCoors.
Brewers have been merging amid a changing beer market with global consolidation and a shift toward more expensive beers. A-B's stock price had been flat for five years and sales of the top selling U.S. brews, Bud Light and Budweiser, have been stale.
InBev chairman CEO Carlos Brito identified little overlap between the two companies and says that a deal would help grow Budweiser globally and help its Stella Artois and Becks brands grow more in the U.S. A-B has distributed InBev brands in U.S. since 2006.
When the unsolicited, non-binding proposal was made, A-B acknowledged that it had received the letter and said at the time it would review it carefully. On June 26 A-B snubbed the proposal saying it did not provide enough value for shareholders. In a conference call with investors the next day, A-B executives outlined a $1 billion cost-cutting plan over the next several years. They said it would generate as much value as the offer from Brito, who for weeks said the company would not bid any higher and would remain open to friendly talks despite moves to oust the current Anheuser-Busch board and creating a roster of 13 new board members.
A-B on Monday filed suit against InBev claiming that its offer was an "illegal scheme" to scam A-B shareholders and that company had not secured financing for a deal.