Geoff Cutmore - Morning Thoughts

Will Bud Drinkers Buy into Belgium?

Geoff Cutmore

It's as American as the stars and stripes and apple pie – but if the speculation is right, Budweiser could be heading into European ownership. The beer-making stocks: InBev, SABMiller and Anheuser-Busch have been trading all week on rumors that InBev is poised to roll out a $46 billion bid for the maker of Bud. Analysts say InBev needs to penetrate the US market to complete its global footprint and few deals would give the same momentum into the North American market.

Will InBev Swallow Up Anheuser?

Hold SABMiller and Anheuser: Think about selling Inbev says MF Global Securities analyst Christopher Gower. Gower thinks there is a risk that InBev could get drawn into overpaying. Industry insiders say the key to the success of the deal is the careful management of the drinks distributors who normally work on exclusive contracts. The relationships have been built over many years and InBev will have to tread gently for fear of upsetting relationships. Some analysts say that could draw out the pace of any dealmaking and prevent the Belgians going hostile.

Questions still remain about how SABMiller will respond. The world's third-largest brewer has already agreed to merge its Miller business with the local unit of Molson Coors Brewing. An Inbev and Anheuser-Busch tie-up would challenge SABMiller’s strategy of increasing revenues. A few analysts argue an alternative InBev and SABMiller deal is unlikely and SABMiller stock may have run too far already on hope over reality.

If the InBev / Anheuser deal happens, perhaps Bud drinkers in the US could expand their palates – they say international travel broadens the mind. Perhaps a half liter of Leffe or Hoegaarden (InBev beers) will help broaden their tastes.

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