It is probably premature to speculate on who might spoil InBev’s beer party, moving to agree a friendly merger with Anheuser Busch in preference to the cost-cutting, zero-base budgeting team from Belgium and Brazil.

But why should that stop us?

InBev has so far avoided comment following the disclosure here that it is actively planning a bid for Anheuser at $65 a share or more. The brewer of Budweiser has been similarly quiet, although one member of the founding family, Adolphus Busch IV (a half brother of chief executive August Busch, told the Wall Street Journal that he is open to the idea of Anheuser and InBev sitting down to discuss a possible deal.

Other drinks companies might also be keen on a chat.

In developing what is known as Project Aluminun, the InBev team have identified two possible interlopers – namely Diageo, which carries the codename Duck, and Heineken, known as Helium to the team from Lazards, Sullivan & Cromwell and others working on the InBev attack.

Blending Guinness and Budweiser would give Diageo some 10 per cent of the world beer market. But, more importantly perhaps, it would offer a compelling union of the world’s largest spirits company with what is the largest beer business in the US. The fact that beer and spirits are often distributed through separate channels – most notably in the US – means the synergies associated with an Anheuser-Diageo union could be considerable.

Meanwhile, a merger between Anheuser and Heineken would bring together what might generally be seen as a very complimentary portfolio of brands globally, with the opportunity to push Budweiser properly across Europe through Heineken’s existing distribution network. The two companies would also complement each other in Russian an China – two markets that both are keen to develop further.

Against that, there is a feeling in the InBev camp that Heineken might come up against anti-trust issues in the US, while such a deal might also provoke a clash in Mexico, where Anheuser has half ownership of Corona and Heineken already has a strong local business. Furthermore, questions remain over the attitude of Heineken’s shareholders – notably the controlling family – and also its ability to execute and finance a deal, given the recent move with Carlsberg to dismantle Scottish & Newcastle in the UK.

This entry was posted by Paul Murphy on Tuesday, May 27th, 2008 at 10:13 and is filed under M&A. Tagged with anheuser-busch, diageo, heineken, InBev, lazards, sullivan & cromwell. Edit this entry.