• by Karlene Lukovitz  @KLmarketdaily, June 3, 2008

Is the long-rumored bid by Belgium's InBev, the world's second-largest brewer, to take over Anheuser-Busch, America's largest brewer, close to becoming a reality?

According to The Sunday Telegraph (via Reuters), InBev has been in talks with JP Morgan, Santander, BNP Paribas and Merrill Lynch, and is close to securing the $50 billion package needed to make the move for A-B. Through Budweiser and other brands, A-B is estimated to hold a 50% share of the U.S. beer market.

With the needed financial backing, InBev would be in a position to send a formal offer letter to A-B's board, and some market sources told the Telegraph that they expected such a move as early as this week.

FT Alphaville had previously reported that a financing package had already been provisionally arranged through JPMorgan and Santander, and that InBev is planning a direct approach to A-B CEO August Busch IV prior to approaching the A-B board with an offer expected to be at $65 per share.

On the other hand, as of Monday, some sources were reporting that InBev was still mulling the acquisition bid. And if the offer is forthcoming, its success is far from guaranteed.

The Busch family owns about 3.5% of A-B and has significant influence on the board. Both Busch IV (who became CEO in December 2006 and reportedly wants more time to demonstrate his leadership) and his father, August Busch III, have stated that the company will not sell. In fact, The Sunday Times reported that A-B has already brought in experts from Goldman Sachs and Citigroup to fend off a takeover.

"A-B takes great pride in being American-owned," notes Eric Schmidt, research director for beverage and liquor industry trade publisher Adams Beverage Group. Schmidt and others also point to a list of other potential obstacles, such as the fact that Warren Buffett of Berkshire Hathaway, which owns about 5% of A-B, has not yet expressed an opinion on such a merger, but has traditionally not supported takeovers of companies in which Berkshire has a significant stake.

Then there's the marked difference between the cultures of the cost cutting-focused InBev conglomerate and employee-conscious A-B. Also, according to Fitch Ratings, the strong possibility that InBev and other global brewers "may prefer to postpone embarking on any industry-transforming merger and acquisition activity until they have built up further critical mass" by snapping up regional companies in emerging markets where beer sales are on a growth curve. A-B is dominantly U.S.-focused, and its core brands lost 1.4% in sales in this year's first quarter.

However, others note that A-B's board may feel compelled to consider an offer as attractive as $65 per share.

Neither A-B or InBev is commenting for the record and for now, the industry will just have to wait and see how the brew-ha-ha plays out.

Still, if it doesn't happen now, it might still happen later. The brewing industry continues to consolidate to leverage distribution networks, reduce costs and realize synergies across markets and/or categories.

Case in point: The joint venture between Miller Brewing Co., owned by London-headquartered SAB Miller, and Coors Brewing Co. is expected to receive final approval from the U.S. Department of Justice soon and close within a matter of weeks, according to The Business Journal.

That, Miller Brewing Co. President/CEO Tom Long told the publication, will allow Miller and Coors to "compete on a much more even keel" with A-B. The combined company would have estimated U.S. beer market share of just less than 30%.

Just to make the suds opera even more interesting, if thwarted on the A-B front, InBev is reportedly considering a "Plan B" acquisition of SABMiller.