The Associated Press February 15, 2007, 3:33PM EST

Brewers' shares rise on reported talks

Shares in brewers InBev SA and Anheuser-Busch rose Thursday on a Brazilian newspaper report about talks to unite the world's largest beermakers.

Belgium-based InBev declined to comment on the report in Sao Paulo business daily Valor Economico that InBev had held preliminary merger talks with its U.S.-based rival. The newspaper cited an unidentified source which it said was close to leading Brazilian investors.

"We do not comment on market speculation," said Gwendoline Ornigg, InBev's director of corporate external communications.

Anheuser-Busch echoed that, saying it was the company's policy "to not confirm, deny or speculate on reports of potential investments, acquisitions, mergers, new business partnerships or other transactions."

Industry watchers said a business combination would make long-term strategic sense.

A research report by UBS Investment Research to clients Thursday pointed out benefits for both brewers if a merger were to take place. InBev would gain greater marketing and distribution power in the United States, while offering Anheuser-Busch a strong global distribution network.

Additionally, Anheuser-Busch has a 50 percent stake in Modelo, the leading Mexican brewer which would complement InBev's strong position in Latin America, the report said.

InBev could lose control of the combined group, which could be a stumbling block to a deal, UBS said.

Eric Shepard, executive editor of the trade publication Beer Marketer's Insights said on-again off-again talks had been rumored for some time.

Because it's not clear what form a deal might take, he couldn't speak to the price range of a deal between the brewers or regulatory issues that would come into play.

Shares in InBev, which makes brands such as Stella Artois and Brahma, gained 3.9 percent to $68.95 in Brussels trading.

Shares in St. Louis-based Anheuser-Busch, the maker of Budweiser and Bud Light, rose 3 percent to $51.72 on the New York Stock Exchange.

The report boosted other beermakers, including Heineken NV, up 2.3 percent, SABMiller PLC, up 2 percent, and Scottish & Newcastle, up 1.2 percent.

Shares of Molson Coors Brewing Co. rose more than 6 percent after the company reported fourth-quarter profit rose more than four-fold on increased sales volume, a lower tax rate and cost savings.

Valor Economico said that since InBev -- which was formed by a merger of Belgium's Interbrew and Brazil's AmBev -- had overtaken Anheuser-Busch to become the world's largest brewer, it felt it could negotiate from a position of strength.

The brewers already have ties to one another.

In November, Anheuser-Busch announced it would become the exclusive U.S. importer of Inbev SA's beers, including Beck's, Bass and Stella Artois. InBev's Canadian brands, like Labatt Blue, were not included in the agreement.

Last May, Anheuser-Busch announced it would pay $82 million for InBev's Rolling Rock beer brand and last February said it would be the sole U.S. distributor of the European beer Grolsch.


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