A-B and InBev Agree to Ceasefire

Could Reach Deal as Soon as This Weekend

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CHICAGO (AdAge.com) -- Anheuser-Busch and InBev have entered friendly talks that could result in America's "King of Beers" agreeing to fall into foreign hands as soon as this weekend.
August Busch IV
August Busch IV Credit: Bill Greenblatt

According to published reports, InBev has raised its bid for A-B from $65 a share to $70 per share, prompting A-B's board, which had rejected the earlier offer as too low, to return to the table. The new bid values A-B at about $50 billion.

A return to friendly negotiations is a startling development in a saga that had grown increasingly hostile over the last two weeks. While InBev had originally made a friendly overture, it had more recently been engaging in legal maneuvering to remove A-B's board. A-B, for its part, has lately moved to paint InBev as dishonest.

As recently as last spring, A-B CEO August Busch IV said a takeover of A-B wouldn't happen on his watch.

WSJ, NY Times say takeover likely
If, as reports in The Wall Street Journal and New York Times suggest is likely, A-B accepts the offer, the combined company that results will be the world's largest brewer, adding A-B's dominant share of the U.S. market to InBev's strong presence throughout Europe and South America. It would add the world's two largest beer brands -- Bud Light and Budweiser -- to a stable of brands that already includes Beck's, Stella Artois, Brahama and Bass Ale.

The deal could have enormous implications for A-B's U.S. marketing machine, which is fueled by a total budget of more than $1.3 billion. InBev's philosophy of zero-based budgeting would seem to run in contrast with A-B's aggressive spending on network TV ads and sports sponsorships.

InBev's CEO Carlos Brito has said he realizes how central sports platforms have historically been to the Budweiser franchise, and that "nobody would in their right mind change that." But people familiar with InBev's history of cost-cutting say the brewer's marketing department ought to expect significant cuts. A-B's primary agency is DDB, Chicago, but it also works with Euro RSCG, Cannonball, Hill Holiday, LatinWorks, TBWA/Chiat/Day, Goodby Silverstein & Partners and a number of smaller agencies, many of which are located in the St. Louis area.
Carlos Brito
Carlos Brito Credit: InBev

Stella a foreshadowing?
The closest thing to a Bud-in-the-U.S. precedent for InBev came when it took over Stella Artoisin 2005, as the brand has a Bud-like positioning in the stagnant, mature U.K. market. InBev at first cut its measured-media spending in half, but quickly boosted spending back to earlier levels when sales tanked. It did, however, pull out of at least one major sports sponsorship (the Artois Championships, a major tennis tournament).

It's also unclear how A-B's core consumers will respond to foreign ownership. A-B has frequently wrapped itself in the flag, marketing Budweiser as the "great American lager," running ads featuring U.S. soldiers and the fallen World Trade Center towers and even taking shots at rivals Miller and Coors when they fell into foreign hands.

Calls to A-B spokespeople were not immediately returned. An InBev spokesman declined to comment.
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