Today, the Wall Street Journal let the cat out of the bag that despite rumors to the contrary, Anheuser-Busch and InBev have indeed met to discuss a possible merger, and that such a merger could conceivably take place this year. In the article, Anheuser-Busch Dances With InBev, states that “InBev and Anheuser already have held discussions, say people in the industry familiar with both brewers’ thinking. Although reports of the talks surfaced as long as a year ago, they have become more serious, and a deal is possible this year, people in the industry say.” They further note that, as became clear last month, much of A-B’s growth in 2007 came from their imports, including those that came from their deal last year with InBev. But some analysts believe shareholders may not be so quick to jump on the bandwagon, because the huge cost of such a merger would dampen a big rise in the share price, perhaps netting no more than a 10% bump initially. But worldwide, there’s very little market overlap between the two, which from an operations stand point makes the two a good fit. Although the Journal also notes — as have other insiders — A-B has every incentive to delay such a merger for as long as possible in the hopes of resuscitating sales of their flagship brands. This would raise A-B’s stock price, possibly dramatically. Need another reason to wait? A-B currently owns 50% of Grupo Modelo, the makers of Corona, but they have no control. That may change, however, as some believe an opportunity is coming whereby A-B could buy a controlling interest in the maker of America’s most popular import brand.
Based on that information, Bloomberg News this morning promptly reported that InBev’s stock shot up in their native Brussels as did A-B’s stock price here, as well. Both InBev and A-B have declined to comment.
From Bloomberg News:
A merger of the two biggest beermakers by sales would make sense because they dominate different parts of the world, analysts say. It also would help them to stay in the lead as SABMiller Plc and Molson Coors Brewing Co. combine their U.S. units to compete more effectively in the country and Carlsberg A/S steps up its growth by taking over Scottish & Newcastle Plc with Heineken NV.
“From a strategic and geographical point of view, it would be a good move,” Wim Hoste, an analyst at KBC Securities in Brussels, said by telephone. “They have hardly any geographical overlaps, and merger news might be contagious.”
I can’t say I’m surprised as this has been fodder for the rumor mill for well over a year now. At this point I think I’d more shocked if it didn’t happen eventually, but now sooner seems more likely than later.
One bit of levity in all this. DealBreaker.com, which bills itself as “a Wall Street Tabloid,” in a piece entitled One Brewer To Rule Them All, suggests a new name for the merged behemoth: InBusch.