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It’s the season for a cold brew, or two, or four. Summer and beer go together like chili and hot dogs. But soon, the American beer-scape may be changing, so now is the time to grab a hot stock deal. A European beverage giant, InBev NV, has made a bid for one of this country’s major brewers, Anheuser-Busch Cos.

In case you haven’t heard of InBev, they are based in Belgium, and are the makers of Stella Artois, Becks, and Leffe, among others. They claim to be the second largest beer company in the world by volume. InBev was created in 2004 when the Belgian company InterBrew merged with the Brazilian company AmBev. They sell the suds in over 130 countries worldwide.

Anheuser-Busch is the largest brewer in the U.S. with over 48% of the market based on sales of Budweiser, Busch, Michelob, Natural Light and other brands. Worldwide, it is ranked fourth in
revenue after SABMiller, InBev, and Heineken.

InBev is said to be working on a bid for Anheuser-Busch, maybe as high as $46 billion or $65 a share. Analysts think the play is long Anheuser-Busch and short InBev. InBev trades on the NYSE under the symbol ABV. Anheuser-Busch trades as BUD. InBev shares have fallen to the lowest close in four months, based on the rumors. BUD shares meanwhile rose to a record high on May 23rd ($56 a share, with a volume of 54 million shares). However, the ABV P/E ratio of 25.12 beats BUD’s at 19.98.

In the world of beer, nothing is quite what is seems. Anheuser- Busch already distributes InBev’s Stella Artois and Beck’s in the U.S., while InBev already owns the rights to sell Budweiser in Canada. This could give InBev a bit of a hangover should a takeover fail. The combined company (can we call it InBud?) could also face anti-trust hurdles. CEO August Busch IV told the Wall Street Journal that “we have a defense ready to go in the event of an event.” Could someone give him a breathalizer test, please?

Manny Backus
First Hour Trader

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