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Berkshire May Get $600 Mln on Anheuser-Busch Takeover (Update1)

By Josh P. Hamilton

June 18 (Bloomberg) -- Berkshire Hathaway Inc., the investment company controlled by billionaire Warren Buffett, may bank a $600 million profit if InBev NV succeeds in its $46.3 billion takeover of Budweiser-maker Anheuser-Busch Cos.

Buffett's company owned 35.56 million shares of the brewer as of March 31. At the stock's March low of $45.68, the stake was worth about $100 million less than the $1.72 billion Buffett paid. InBev's $65 a share offering price would allow him to unload the investment for $2.31 billion.

Carlos Brito, chief executive officer of InBev, seeks to create the world's largest brewer by sales volume, adding Budweiser to the Leuven, Belgium-based company's Stella Artois, Bass and more than 200 other brands. Berkshire has owned its Anheuser shares for about three years.

``Here's the payout right up front after a very short incubation period as far as Berkshire is concerned,'' said Frank Betz, a partner at Carret Zane Capital Management, which oversees $800 million including Berkshire and Anheuser-Busch shares in Warren, New Jersey. ``I think he would go along with this, especially at the premium.''

Belgium's newspaper De Standaard reported that Buffett had committed to support the takeover, without saying where it got the information.

Buffett didn't respond to repeated requests for comment on InBev's offer, other than to say through his assistant Debbie Bosanek that InBev board member and fellow billionaire Jorge Paulo Lemann is a ``good friend.'' Lemann is one of a trio of Brazilian investment bankers who built Sao Paulo-based Cia. de Bebidas das Americas, or AmBev, which was sold to Interbrew SA in 2004 to form InBev.

Iconic Brands

Lemann and his partners received about $4 billion in InBev stock in the deal. Brito, a Brazilian who had run AmBev, displaced InBev's U.S. chief executive officer in less than two years.

Buffett, 77, owns more than a quarter of Omaha, Nebraska- based Berkshire, which he built over four decades from a failing maker of men's suit linings into a $200 billion holding company with businesses that range from candy-making to insurance. Berkshire earned $13.2 billion last year and has a $72.6 billion stock portfolio.

Ranked by Forbes magazine as the world's richest person, Buffett is known for investing in companies with strong management and durable competitive advantages such as iconic brands, and holding them for years or even permanently. Berkshire is the largest shareholder in American Express Co. and Coca-Cola Co., which it first began buying in 1988.

Anheuser-Busch disclosed that Berkshire was a ``significant shareholder'' in April 2005. The holding totaled 43.85 million shares, or 5.6 percent of the brewer, according to Berkshire's 2005 annual report. Since then, Berkshire trimmed its holding to 5 percent as of March 31, according to a regulatory filing.

Largest Shareholders

Berkshire is the second-largest shareholder, after Barclays Plc, which owned 6.13 percent as of March 31, according to Bloomberg data.

``Our board will pursue the course of action that is in the best interests of Anheuser-Busch's stockholders and expects to make its determination in due course,'' Chief Executive Officer August Busch IV said in a letter to Brito that was distributed as part of a statement this week. Busch took the company helm in December 2006.

In an effort to scuttle InBev's unsolicited bid, St. Louis- based Anheuser-Busch has contacted Mexican brewer Grupo Modelo SAB's Chief Executive Officer Carlos Fernandez on a possible combination, the Wall Street Journal reported on June 12. Buying Modelo, which is 50 percent-owned by the U.S. brewer, would undermine InBev's bid by making the company too expensive for it to buy.

Modelo, based in Mexico City, said in a statement last week that it plans to remain a Mexican-owned company and will make a decision should Anheuser-Busch and InBev decide to merge.

Busch Family

The U.K.'s Guardian newspaper reported that Buffett will meet this week with Anheuser's CEO, citing unidentified people close to the deal. Busch requested Buffett's opinion, and the investor may recommend that the Busch family consider discussions with InBev, the newspaper said.

The Busch family, which has run the brewer for five generations, doesn't have enough shares to block an InBev purchase through a shareholder vote. Anheuser-Busch executives and directors, both family and outsiders, control 4.5 percent of the stock, according to a March regulatory filing.

The Wall Street Journal in February first reported that the two companies had discussed a merger. Anheuser's shares jumped 25 percent from May 1 through yesterday as speculation over a possible bid grew. They rose 70 cents to $61.90 at 4:15 p.m. today on the New York Stock Exchange.

InBev's shares rose 60 cents to 49.18 euros in Brussels trading today, down 6.9 percent from May 1. Berkshire fell $470 to $125,400 in New York trading, a 6.3 percent loss since the beginning of last month.

To contact the reporter on this story: Josh P. Hamilton in New York at jphamilton@bloomberg.net.