Belgian brewer InBev, the world's second-biggest by volume, is working on a $46 billion bid for Anheuser-Busch, according to a source familiar with the situation.
The news sent shares of Anheuser, the largest U.S. brewer, up as much as 10 percent Friday. Shares of InBev closed down 2.9 percent at 48.88 euros. The DJ Stoxx European food and beverage index was down 0.8 percent.
The source said an offer was not certain.
The news was first reported by the Financial Times, in its Alpahville blog. The report cited sources as saying the approach was expected to be pitched at $65 a share but while extensive work was being carried out, InBev was not about to "push the button".
The report also said a financing package of $50 billion had been provisionally arranged through JPMorgan and Santander and that the bid had been discussed at an InBev board meeting on April 28 and at a meeting on Thursday.
InBev said it would not comment on the report. Anheuser was not immediately available but has a policy of not commenting on market rumors. A JPMorgan spokeswoman declined to comment.
Rumors have repeatedly surfaced over a possible bid by InBev, brewer of Stella Artois, Beck's and Brahma, for the U.S. giant, whose output includes Budweiser and Bud Light.
"Anheuser-Busch shares and options have been active throughout the week due to rumors of a takeover," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York.
When, Not If
Gerard Rijk, a beverage sector analyst at ING in Amsterdam, said he felt the deal was a question of when, rather than if, a view shared by others following the sector.
"The consolidation has to continue. There are strategic synergies in North America and China," he said.
InBev, formed from the 2004 merger of Belgium's Interbrew with Brazil's AmBev, has a mature western European market and growth in Latin America, notably in key market Brazil, as well as in eastern Europe and Asia.
Anheuser is dominant in the United States, has a 50 percent stake in Mexico's Grupo Modelo and a strong presence in China, through its 27 percent holding in Tsingtao.
A deal would expand InBev's geographic presence, with little obvious overlap, boost its premium brands and see its cost-focused managers squeeze savings from the U.S. operations.
InBev already has a deal with Anheuser-Bush to distribute InBev beers in the United States.
However, InBev shares have fallen some 18 percent in the past five weeks, partly as a result of weaker than expected first-quarter results.
Chief Executive Carlos Brito has said being the biggest is not the ultimate goal, but InBev is aware that it was overtaken as the world's largest brewer by SABMiller last year.
Rivals Heineken and Carlsberg have also increased their size with their joint purchase of Scottish and Newcastle.
Credit Suisse said in a research note that the $65 a share bid mentioned in the report represented fair value, although would probably have to be higher if it were a hostile approach.
It added that Anheuser could, in defense, seek to make itself larger by taking full control of Grupo Modelo.
Anheuser shares were up more than 7 percent on the New York Stock Exchange Friday.