U.S. brewer Anheuser-Busch accepted a sweetened $50 billion takeover bid from Belgium-based InBev, creating the world's largest beer maker.
InBev, which makes Stella Artois and Beck's, agreed to pay $70 per share for the maker of Budweiser, up from its original unsolicited bid of $65 per share, both companies said on Monday.
The sweetened offer marked a 27 percent premium to Anheuser's record-high stock price in October 2002.
This deal, which is widely expected to gain regulatory approval, would be the largest in the industry and the third-largest ever foreign takeover of a U.S. company.
The combined company will have about $36.4 billion in annual net sales and brew about a quarter of the world's beer.
The beer industry is undergoing a wave of consolidation, with Scottish & Newcastle agreeing to be broken up by Carlsberg and Heineken, and SABMiller and Molson Coors Brewing agreeing to merge their U.S. operations.
Based on Anheuser's 713 million shares outstanding as of March 31, the deal values the company at $50 billion. The companies pegged the price tag of the deal at $52 billion, but did not elaborate on what that value reflected.
InBev's Chief Executive Carlos Brito will be CEO of the combined company, which will be called Anheuser-Busch InBev. Anheuser will get two seats on the new company's board.
Anheuser's home town of St. Louis, Missouri, will be the headquarters for the North American region and the global home of the flagship Budweiser brand. The companies said all of Anheuser U.S. breweries would remain open.
The deal brings an amicable resolution to a month-long saga that was becoming increasingly hostile as the companies traded lawsuits and InBev set the stage to replace Anheuser's board.
InBev had proposed its own slate of nominees for the board of directors that included Adolphus Busch IV, an uncle of Anheuser-Busch's current chief executive. Shares of InBev and Anheuser surged on Friday as news of the higher offer and the negotiations emerged. Anheuser closed up 8.6 percent at $66.50 and InBev closed up more than 7 percent.
Sources said the two companies and their advisers had talked in New York over the weekend, working through details such as the name for the combined company, roles for Anheuser's executives and the structure of the board.
The breakup fees if the deal collapses also were discussed over the weekend, the sources said.
Friendly Deal
A deal at $70 per share is an about-face for both sides, said Morningstar analyst Ann Gilpin, noting that Anheuser Chief Executive August Busch IV had said he wouldn't sell the company and InBev CEO Carlos Brito said he wouldn't go higher.
"It's better that they reached a friendly deal than going hostile. That can make integration a complete nightmare," Gilpin said. "Anheuser-Busch knows the U.S. market a lot better than InBev, so InBev needs to retain key management from Anheuser for marketing and distribution."
To Gilpin, Anheuser shares are only worth $57 on a stand-alone basis, but she said $70 was a fair price to pay, since InBev would be able to cut costs and sell Budweiser and Bud Light -- the world's two top-selling beers -- overseas.
"The management team at InBev doesn't think about the future in terms of quarters and years. They look at it in decades. They're thinking about this investment for the next century," Gilpin said.
The companies said the deal would create benefits through revenue enhancement and cost savings. The combination will yield cost synergies of at least $1.5 billion annually by 2011 phased in equally over three years, the companies said.
The transaction is expected to be neutral to normalized earnings per-share in 2009 and boost earnings beginning in 2010, the companies said.
Adding another dimension to any deal was Mexico's No. 1 brewer Grupo Modelo, which is 50 percent owned by Anheuser. Modelo, which does not have the power to veto an Anheuser takeover, said it was in talks with InBev on how both companies could work together.
Everybody Wins
"It is truly a win/win," situation, said Tom Pirko, president of beverage industry consulting firm Bevmark. "Both got precisely what they wanted."
Anheuser, whose shares have stagnated for five years as it failed to expand internationally like its rivals, will get a shot in the arm, its shareholders will get a handsome premium, and InBev will become the world's No. 1 brewer by volume, Pirko said, beating out London's SABMiller for the top spot.
Anheuser-Busch's independence dates back roughly 150 years to the Bavarian Brewery in St. Louis, which Eberhard Anheuser bought in 1860. Several years later his son-in-law Adolphus Busch took over, starting the Busch family's reign, which was interrupted only once, when Patrick Stokes served as CEO from 2002 to 2006. Stokes is currently chairman of the board.
InBev is known for ruthless cost-cutting, and its advances on a U.S. icon sparked an outcry from St. Louis to Washington, with even democratic presidential candidate Barack Obama weighing in against a deal.
Analysts have said that Modelo is likely to embrace InBev's bid for Anheuser and hopes the Belgian brewer proves to be a more dynamic and innovative partner than the biggest U.S. brewer.
InBev, which was formed by the 2004 merger of Belgium's Interbrew with Brazil's AmBev, is based in Leuven, Belgium and run by a mostly-Brazilian management team. Its portfolio includes more than 200 brands.
While Anheuser earns about 85 percent of its profits from the United States, where it controls nearly half the market, InBev has strong positions in Western Europe and Latin America and is growing in Eastern Europe and Asia.