/ 27 May 2008

InBev on verge of talks with Anheuser, SABMiller soars

World number two brewer InBev was on the verge of merger talks with Anheuser Busch, a newspaper said on Tuesday, while consolidation fever drove up shares in global leader SABMiller.

Belgian business daily De Tijd reported on Tuesday that InBev’s board of directors was about to decide whether to allow company advisers to start negotiating with Anheuser, without disclosing its sources.

SABMiller shares, on their first day of trading since a weekend report that InBev might be eyeing the company as an alternative to Anheuser, shot up as much as 8,2% to a 19-week high of £13,24.

InBev shares lost at much as 3,5% and hit a four-month low of €46,23 on the newspaper report, amid concerns it might be set to issue new shares.

An InBev spokesperson declined to comment on the report and said it was not the company’s policy to divulge when board meetings took place. SABMiller, known for its Miller Lite, Peroni and Pilsner Urquell brands, also declined to comment.

The Financial Times reported last Friday that InBev was considering a $65-a-share bid but while extensive work was being carried out InBev was ”not about to push the button”.

A source close to the situation confirmed to Reuters on Friday that a bid was being prepared.

The FT report said a financing package of $50-billion had been provisionally arranged through JPMorgan and Santander and that the Belgian company had not excluded a hostile bid.

Talk of a possible bid by InBev — brewer of Stella Artois, Beck’s and Brahma — for the United States maker of Budweiser and Michelob has increased in the past weeks after surfacing several times before.

A Busch family member, Adolphus Busch IV, told the Wall Street Journal on Tuesday some family members were open to holding talks with InBev but others wanted to keep the status quo.

InBev, formed from the 2004 merger of Belgium’s Interbrew with Brazil’s AmBev, has a fraction of the US market but has mature businesses in Western Europe.

It is also present in growth markets in Eastern Europe, Asia and Latin America, notably in the key market of Brazil.

Anheuser dominates the United States and also has an equity stake in China’s Tsingtao, but has struggled recently as US consumers abandon domestic beer for wine, spirits, foreign beers or small-batch craft brews.

Analysts are excited about savings InBev’s cost-focused executives could root out.

The beer industry is experiencing a wave of consolidation, with SABMiller and Molson Coors Brewing aiming to combine their US units and Scottish & Newcastle agreeing to be broken up by Carlsberg A/S and Heineken NV. – Reuters 2008