USA: Anheuser's InBev pact – analysts’ forecast

Anheuser-Busch Cos Inc.'s pact to import InBev brands such as Stella Artois gives the U.S. brewer the high-end beers it needs to compete, but without knowing the financial terms, Wall Street is unsure how much the deal may help Bud's profits, Reuters reported December, 01.

The deal "demonstrates (Anheuser-Busch's) willingness to 'go where the growth is'" and "helps allay investor concerns about its portfolio," UBS analyst Kaumil Gajrawala wrote in a research note.

The deal with Belgium's InBev is the latest step that Anheuser-Busch has taken to gain a stronger foothold in the upper tier of beer. In the past year, it bought Rolling Rock from InBev and reached a deal to be the exclusive importer and distributor of Grolsch NV's. Goldman Sachs analyst Judy Hong, who has a "sell" rating on Anheuser-Busch, called the transaction "a modest positive."

She expects it to add about $300 million to sales and 2 cents per share to earnings in 2007, assuming that Anheuser gets a 10 percent to 15 percent importer margin on the brands and pays 8 to 10 times EBITDA for the importer rights.

"There is no change to our fundamental view of the stock on today's news as we continue to expect the company will need to spend at the high end of its guidance range to revive volumes for the Budweiser family," Hong said in a note on Thursday.

At a meeting with analysts on Tuesday, Anheuser-Busch said part of its plan for 2007 includes adding more sales representatives in urban markets to help promote its products, especially smaller craft beers, as well as imports.

President and Chief Executive August Busch IV said in a statement that the InBev deal should help Anheuser-Busch better compete for consumers looking for "sophisticated imports" and compliment its lineup of American beers.

"While the transaction is small, we nonetheless consider it positive," said Stifel Nicolaus analyst Mark Swartzberg, who has a "hold" rating on Anheuser-Busch.

Swartzberg raised his 2007 earnings per share estimate by 2 cents, assuming profit per case of $3, or about $62 million in pretax profits, that Anheuser-Busch pays 10 times that amount, or $620 million, for the rights.

Shares of St. Louis-based Anheuser-Busch rose 1.9 percent after the deal was announced on Thursday, and were up 0.8 percent at $47.89 in midday trading on Friday.

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