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InBev Thirsty For Budweiser


European beer maker sets sights on U.S. imbibers.


Budweiser's not just for underage kids anymore.

The Financial Times reported this morning that Belgian beer maker InBev is working on a takeover bid of Anheuser Busch (BUD). The $46 billion deal would create one of the world's largest brewers.

Bud shares are popping today, up almost 7% to an all-time high. InBev, which churns out such brands as Bass, Stella, Hoegarden and Beck's, is reported to be working with JPMorgan Chase (JPM) and Banco Santander to finance the transaction. None of the companies involved commented on the newspaper's report.

InBev made little headway with overtures to Anheuser Busch CEO August Busch IV last fall. New on the job, Busch vowed to fight for his company's independence. The FT reports that InBev now expects him to act in the best interest of the company's shareholders, who stand to book a tidy profit if the deal goes through. The $46 billion price tag values the maker of Budweiser at close to $65 per share, almost a 20% premium to where the stock is trading today.

Beer is the ultimate recession-proof product. Investors often quip that people drink to celebrate during good times and to drown their sorrows in bad, so beer stocks offer a refreshing hedge against economic downturn. Southern Comfort and Jack Daniels aren't a bad choice if things get really ugly, a notion that should fatten up the bottom line at the Brown-Forman Corporation (BFB).

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While many avid drinkers would argue that paying $46 billion for a whole bunch of Budweiser is tantamount to carting truckloads of money to the local incinerator, and that Bud is stale, watered-down food coloring, hard data suggests otherwise. Americans guzzled Bud Light more frequently than any other beer last year.

According to Information Resources, a leading provider of consumer spending information, Bud Light generated $1.3 billion in sales in 2007, nearly twice that of Miller Lite - a distant second at $670 million. Taking the bronze medal with $636 million in annual receipts was the King of Beers. With its two top U.S. brands alone, InBev would immediately pick up $2 billion in annual sales with the purchase of Anheuser Busch. That's approximately 10% of what the FT estimates total sales of the merged company would be.

Minyanville's resident booze and gambling expert, Kentucky native Kevin Depew, has written frequently about the merits of owning alcohol stocks during tough times - and conducted extensive research on their lines.

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No positions in stocks mentioned.

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