InBev and A-B agree to combine


InBev and Anheuser-Busch announced an agreement to combine the two companies, forming the world’s leading global brewer. A-B shareholders will receive $70 per share in cash, for an aggregate equity value of $52 billion. The combined company will be called Anheuser-Busch InBev. Both companies’ Boards unanimously approved the transaction.

The combination of Anheuser-Busch and InBev will create the global leader in the beer industry and one of the world’s top five consumer products companies. On a pro-forma basis for 2007, the combined company would have generated revenues of $36.4 billion and EBITDA of $10.7 billion.

The company will make St. Louis, Missouri the headquarters for the North American region and the global home of the flagship Budweiser brand. Given the limited geographical overlap between the two businesses and the efficiency of Anheuser-Busch’s brewery footprint in the United States, all of Anheuser-Busch’s U.S. breweries will remain open.

InBev CEO Carlos Brito will be chief executive officer of the combined company. The Board of the combined company will be comprised of the existing directors of the InBev Board, A-B President and CEO August Busch IV and one other current or former director from the A-B Board. In addition, the combined company’s management team will draw from key members of both InBev’s and Anheuser-Busch’s current leadership. Anheuser-Busch will become a wholly owned subsidiary of InBev upon the completion of this transaction.

Budweiser, together with Stella Artois and Beck’s, will become the combined company’s leading global brands. The combination will yield cost synergies of at least $1.5 billion annually by 2011 phased in equally over three years. Synergies will largely be driven by sharing best practices, economies of scale and rationalization of overlapping corporate functions. InBev has a strong track record of delivering synergies in past transactions and is confident in its ability to achieve these synergies.

RBR/TVBR observation: Perhaps the synergies will include InBev taking over the media buying for the combined entity. This may happen soon enough to reverse the recent A-B decision to cut radio out of the second half of 2008. It may be a good time for radio sales teams to introduce themselves to the InBev marketing staff and media agencies.