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Acquiring the largest U.S. brewer to form a corporate giant capitalized at nearly $90 billion would be a remarkable dealmaking triumph for a company that has expanded, mainly through acquisitions, from a little-known domestic brewer less than 20 years ago into the world's No. 1 producer. If a deal does close, the new company, dubbed InBud in some circles and AnheuserBev in others, would be No. 1 or No. 2 in the world's most important markets, presiding over a powerful case of brands including InBev's Beck's and Stella Artois and Anheuser's Budweiser and Bud Light. More importantly, InBev would instantly claim 48.5% of the U.S. market, where it currently depends on Anheuser for distribution. As InBev reportedly plots a $45 billion-plus offer and scrambles to line up the necessary financing, industry observers expect a cautious approach if and when top brass at Brouwerijplein (Brewery Square) in downtown Leuven, Belgium, finally sit down with their counterparts at One Busch Place in St. Louis. "I don't think it would be worth it for InBev to go hostile," suggests Robbert van Batenburg, head of research at Louis Capital Markets LP in New York. "The trick is to present any deal as a merger of equals where Anheuser all of a sudden becomes the biggest brewer in the world and August Busch IV is put at the top of the executive ranks." As recently as April, August Busch IV, who took over as president and CEO from his father, August Busch III, in December 2006, reportedly told beer distributors that the company would not be taken over "on my watch." Although father and son together own only 1.7% of the brewer, there are widespread fears that InBev would lay off workers and cut marketing budgets at Anheuser, risking damage to such U.S. brands as Bud Light and tarnishing a 150-year-old corporate giant that symbolizes St. Louis as much as the Gateway Arch. While InBev would initially woo the man known as "The Fourth," its central pitch would be directed at the company's board, most notably Warren Buffett, whoseBerkshire Hathaway Inc. owns 5% of Anheuser. Should InBev offer $65 a share, as expected, Buffett could see a 35% return on his $2.3 billion investment. "Anheuser's board holds the key to any deal," said one industry expert who requested anonymity. "These are sophisticated investors with the fiduciary duty to demand management explain how they would create as much value by continuing alone as they would from a combination with InBev. That won't be so easy given InBev's and AmBev's impressive value creation track records." Joining forces with InBev could also be Anheuser's last and best chance to escape the sidelines of dealmaking that has shaped the industry over the past several years.SABMiller plc was formed in 2002, when South African Breweries plc acquired Miller Brewing Co. from Philip Morris Cos., now Altria Group Inc. Two years later, Interbrew combined with Brazil's Cia. de Bebidas das Américas, or AmBev, in a complex $11 billion merger to form InBev. More recently, Denmark'sCarlsberg A/S and Heineken NV of the Netherlands are downing U.K.-based Scottish & Newcastle plc, while the Molson Coors Brewing Co. and SABMiller are combining their U.S. and Puerto Rican operations. Though the top five players control 50% of the world's beer market, there is still potential for smallish deals in a few scattered markets. Still, the "industry-changing deal" everyone is eagerly awaiting is the merger that will create the world's first $100 billion brewer, InBev should not dawdle, several analysts caution. A strong euro against the U.S. dollar would now give InBev the upper hand in any deal, says van Batenburg, while Anheuser's high raw material exposure and the declining domestic market share of Budweiser make it more vulnerable. He adds that a new administration may make it more difficult to get any deal approved without major divestitures. As he puts it, "If InBev wants to do a deal, they had better do it now." -- Renee Cordes See related story: InBev may make move for Bud Categories Deal Video
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Long before InBev SA was created in 2004, executives and family shareholders at the Belgian company formerly known as Interbrew had harbored a thirst for Anheuser-Busch Cos. Now that a 
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