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InBev reaffirms proposal to buy Anheuser-Busch - update

Sunday, InBev reaffirmed its proposal to combine with Anheuser-Busch Cos. Inc. (BUD) to form the world's leading global brewer. The company said that the $65 per-share purchase price was made on the basis of Anheuser Busch's current assets, business and capital structure.

In a letter sent to August Busch IV, president and chief executive, and the Anheuser-Busch board, InBev said, "We have read the recent press reports suggesting that you may have approached Grupo Modelo regarding a possible transaction between Anheuser- Busch and Grupo Modelo or affiliated entities."

The letter added, "we would expect that prior to proceeding with any alternative transaction, especially if your shareholders will not be given the opportunity to vote on it, you would first fully explore our offer and the potential adverse consequences any such transaction could have on the ability of your shareholders to receive our premium offer."

InBev, the world's biggest brewer by sales, stated that it remains ready to discuss the proposal with Anheuser-Busch, and it expects response from Anheuser-Busch shortly.

Earlier this week, U.S. brewer Anheuser-Busch revealed an unsolicited offer from Belgium-based InBev to buy the company for $65 per share in cash or about $46.3 billion.

The offer price marks an immediate premium of 35% over Anheuser-Busch's 30-day average share price prior to recent market speculation, and an 18% premium over Anheuser-Busch's previous all-time high of $54.97 recorded in October 2002.

The deal will provide InBev an edge over British brewer SABMiller Plc (SAB.L), the world's biggest brewer by volume, which recently agreed to combine its U.S. division with that of Molson Coors. The combination is expected to create the global leader in the beer industry and one of the world's top five consumer products companies.

Additionally, InBev, maker of Stella Artois and Leffe brands, has proposed to name the combined company to evoke Anheuser-Busch's heritage, reflecting the strong history of Anheuser-Busch's key brands.

InBev will invite a number of directors of Anheuser-Busch to join the board of the combined company and will also seek to retain key members of Anheuser-Busch's management team across the organization. Considering the limited geographical overlap between the two businesses and the efficiency of Anheuser-Busch's brewery footprint in the U.S., InBev intends to maintain all of Anheuser-Busch's U.S. breweries.

A combination of Anheuser-Busch and InBev is expected to result in significant growth opportunities from leveraging the combined brand portfolio, including the global flagship Budweiser brand and international market leaders like Stella Artois and Beck's. InBev currently dominates the Latin American market.

Due to the limited overlap between the InBev and Anheuser-Busch businesses, InBev believes that the proposed combination should not encounter any significant regulatory issues and expects that the proposed transaction could be completed promptly.

However, the offer is not being welcomed by Anheuser-Busch employees on concerns of job cuts. A lawsuit was filed against the company by a shareholder on Thursday stating the price was grossly inadequate.

Meanwhile, Standard & Poor's said Thursday it might cut its ratings on Anheuser-Busch. "We believe that if the transaction proceeds and includes a significant amount of debt financing as indicated by InBev, credit measures will weaken well below Anheuser-Busch's current levels."

The transaction will be financed with at least $40 billion in debt, and a combination of divestitures of non-core assets and equity financing. The company is committed to retaining an investment-grade credit profile.

Anheuser-Busch shares closed Friday's regular trading session at $61.12, down 28 cents. In the after-hours, the shares gained 5 cents.

by RTT Staff Writer

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