InBev makes $46bn offer for Anheuser-Busch

LONDON - Stella and Budweiser could be coming together in the world's largest drinks company takeover, after InBev offered to buy Anheuser-Busch for $46.3bn in cash.

InBev has offered $65-per-share in cash for Anheuser-Busch, representing a premium of 35% over Anheuser-Busch's 30-day average share price prior to recent market speculation, and an 18% premium over Anheuser-Busch's previous all-time high of $54.97 in October 2002.

The combined company would have sales of $36.4bn and Ebitda of $10.7bn.

The combination of the American Anheuser-Busch and InBev would create a global leader in the beer industry, surpassing London listed SABMiller, which last signed a $10bn merger with Molson.

It would make the combined firm one of the world's top five consumer products companies, bringing together not only Budweiser and Stella Artois, but also Bock, Beck's and Michelob. It would also give the Belgium-based InBev a commanding position in the US market.

Internationally the company would also be strong in Canada and Mexico, where Anheuser-Busch owns half of Mexican brewer Grupo Modelo and has a stake in Tsingtao Brewery in China.

These markets would fit well with InBev's strength in Europe and Latin America. The two already have a US distribution partnership.

There are likely to be major job cuts in the US as part of the deal, but InBev said it would make the St. Louis headquarters of Anheuser the North American regional home of the Budweiser brand.

It also said that it would retain all of Anheuser-Busch's US breweries, as there is limited overlap between the two.

In addition, InBev has proposed to name the combined company to evoke Anheuser-Busch's heritage, reflecting the strong history of Anheuser-Busch's key brands. InBev would invite a number of Anheuser-Busch's directors to join the board of the combined company and would seek to retain key members of Anheuser-Busch's management team across the business.

Carlos Brito, chief executive officer of InBev, said: "We have the highest respect for Anheuser-Busch, its employees and its leadership, who have built the leading brewer in the US and grown the iconic Budweiser brand.

"Together, we would draw on the collective expertise of both companies' management and employees. The combination will create a stronger, more competitive, sustainable global company which will benefit all stakeholders.

"We view this combination as a natural next step for both companies, who already enjoy successful partnerships in the US, Canada and South Korea. In Canada, both InBev and Anheuser-Busch have seen significant benefits from our existing relationship which spans almost 30 years, during which InBev has helped to make Budweiser the number one beer in Canada with average annual volume growth of 7.2% since 1998."

The merger would cement InBev's rise as a global leader emerging from a number of small Belgium firms 20 years ago, steadily buying one firm after another. Along the way this has seen it acquire Beck's in 2001 and then merge with AmBev in 2004 to form InBev.

As the two firms are geographically quite distinct the deal could escape significant regulatory hurdles.

The global advertising account for Stella is handled by Interpublic Group-owned Lowe Worldwide, while Budweiser is handed by Omnicom-owned DDB worldwide.

The following is a copy of the letter InBev sent to the Board of Anheuser-Busch with respect to its proposal:

June 11, 2008
Mr. August A. Busch IV
President and Chief Executive Officer
Anheuser-Busch Companies, Inc.
One Busch Place
St. Louis, Missouri 63118
Proposal for Combination Creating the World’s Leading Beer Company

Dear August,

Over the past several years we have met with you on many occasions to explore ways in which we could deepen the relationship between our two great companies. Jorge Paulo Lemann and Marcel Telles greatly appreciated your taking the time to meet with them on Brussels, 11 June 2008 – 5/8 the 2nd of June in Tampa.

During the course of that meeting you asked whether we had a formal proposal to make to you and your Board of Directors regarding a potential

Although we did not put forward a specific proposal at the time, I am now writing to provide you with proposed terms. As discussed on the 2nd of June, we believe that the combination of Anheuser-Busch and InBev would be an industry-transforming event, creating an unparalleled opportunity for our two companies’ consumers, wholesalers, employees, business partners, investors and the communities they serve. Our successful collaboration in Canada, Korea and, more recently, the United States, gives us confidence that, together, we can achieve more for our various stakeholders than would be possible apart.

We believe that the best way to achieve this transformational combination for all constituents, including Anheuser-Busch’s shareholders, is an all-cash acquisition of Anheuser-Busch by InBev. InBev is prepared to pay $65 per share in cash for all of the outstanding shares of Anheuser-Busch. A price of $65 per share would deliver to your shareholders an immediate cash premium of 35% over the 30-day average share price prior to recent market speculation and 18% over the previous all-time high achieved in October 2002.

We have the highest respect for Anheuser-Busch, its employees and leadership, as well as the generations of investment that have created the Anheuser-Busch brands, particularly the iconic Budweiser brand. We hold your management’s marketing and sales capabilities in great esteem and hope that the combined company will be able to draw on their collective expertise. We also recognize the great contribution of your wholesalers, many of whom are now entrusted with our European import brands in the US, to this achievement. We are strong believers in the three-tier system in the US and would make it a central imperative to work with your wholesalers to create even greater excitement in the marketplace around all of our brands.

We would position Budweiser as our global flagship brand, leveraging our international footprint to enhance the brand's image and exposure. We already have a winning track-record of building your brands outside the United States. In Canada we have a successful partnership spanning almost 30 years that has resulted in sales volumes of the Anheuser Brussels, 11 June 2008 -- 6/8 Busch brands growing at a compounded annual rate of 7.25% since 1998. In fact, together we have made Budweiser the number one beer in Canada. Bud Light has grown at similar rates. Importantly, both brands continue to gain share.

We also have longstanding admiration for your strategic partner, Grupo Modelo. The prominence of their brands in North America is truly impressive. We would hope to work with Grupo Modelo to find new opportunities to further accelerate the development of their brands outside North America.

Together we would be the leader in the industry and one of the top five consumer products companies globally, with pro forma 2007 beer volumes of 460 million hectoliters, net sales and Ebitda of $36.4 billion and $10.7 billion, respectively. In bringing together our two companies, we would seek to draw on our complementary strengths and rich histories. We would envision making St. Louis the headquarters for the North American region and the global home of the flagship Budweiser brand. Also, we would seek to rename our combined company to evoke the heritage of your key brands. Given your efficient brewery footprint in the United States, we will maintain all your existing breweries. Further, we will continue your strong commitment to the communities in which you operate.

We would like to draw on the skills and experience of the current Anheuser-Busch directors and would invite a number of your directors to join the Board of the new company. In addition, we would hope to retain key members of the Anheuser-Busch management team at all levels of seniority. The global scope of operations would offer new challenges to gifted managers. We look forward to discussing Board and senior management composition at the appropriate time.

We have been advised that this letter, or the making of this proposal, does not create any public disclosure obligations on your part. Rather, we would prefer to engage in a dialogue with you and your Board regarding our proposal.

In order to move forward quickly, we have retained Lazard and JP Morgan as our financial advisors and Sullivan & Cromwell as our legal advisor, which, alongside our senior management, have already completed extensive analysis and due diligence based on publicly available information. We have also received strong support from a group of Brussels, 11 June 2008 -- 7/8 leading financial institutions, including Banco Santander, Barclays Capital, BNP Paribas, Deutsche Bank, Fortis, ING Bank, JP Morgan and Royal Bank of Scotland, who together would be prepared to provide all of the financing required to complete this transaction.

Additionally, we have concluded after appropriate review that the proposed combination should not encounter any significant antitrust related issues. As you would expect, this non-binding proposal is subject to the negotiation of mutually satisfactory definitive agreements and the completion of customary due diligence, all of which could be progressed and finalized without delay.

We would like to arrange a meeting promptly with you and your representatives to discuss all aspects of our proposal and answer any questions you may have. Now is the time to make this compelling combination a reality. Our Board, our majority stockholder and our management team are committed to making this happen.

It is our current intention to keep the contents of this letter private. However, given the significance of this proposal to our respective shareholders and the widespread speculation with respect to this potential transaction, we may be required by regulatory authorities to make public disclosure of this letter in the future. If circumstances permit, we will endeavour to notify you in advance of any such release.

This matter has the highest priority for InBev. I look forward to hearing positively from you shortly.

Very truly yours,
Carlos Brito
cc: Board of Directors of the Anheuser-Busch Companies, Inc.
Dutch and French versions

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