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November 18, 2008 5:50 PM

InBev/Anheuser-Busch: It's Finally Done--and Our Belgian Beer Overlords Are Here

Posted by Zach Lowe

It took $52 billion, 23 banks, a $10 billion bridge loan and at least six law firms, but it's finally done: InBev, the Belgian brewer of Stella Artois and Beck's, has finalized its purchase of Budweiser maker Anheuser-Busch to form a beer colossus that will be known as Anheuser-Busch InBev.

The new company will produce about a quarter of the world's beer and control between 40 and 50 percent of the coveted U.S. suds market, Reuters says.

Lawyers involved in the deal--believed to be the largest hostile cash takeover in history--all said they were surprised and heartened that they were able to close the deal amid an unprecedented credit crisis.

"Whenever you have a large unsolicited deal for an American icon, you know it will be difficult," says Francis "Frank" Aquila, the Sullivan & Cromwell partner who led what he called the firm's "cast of thousands" in advising longtime client InBev. "To actually get it done in this environment was amazing."

The deal started as a hostile $65 dollar-per-share offer on June 11 that the Anheuser-Busch board rejected. On July 7, S&C filed paperwork with the Securities and Exchange Commission on behalf of InBev to have A-B's board of directors removed and replaced.

The next day, A-B and its lead U.S. legal team at Skadden, Arps, Slate, Meagher & Flom, which has represented the St. Louis-based brewer for several decades, called and said it was ready to negotiate.  Representatives for the two sides met in person at S&C's midtown Manhattan conference center on July 11, and signed the final deal two days later, Aquila says.

An adviser to A-B says two things swayed the U.S. company's board. First, InBev increased its offer to $70 per share, which brought the total bid to about $52.5 billion. Second, InBev included few closing conditions in the deal, giving the Belgian company little wiggle room if it decided to walk away at the last minute.

"After price, that was the most important thing," says this adviser, who wished to remain anonymous but was central to the deal. "We needed to have certainty of closing."

InBev was able to provide that certainty because it had good reason to be confident that its funding for the deal was firm, even if the economy tanked. InBev's team had convinced 23 banks to lend it about $45 billion using the U.K.'s so-called certain funds financing structure, which places far fewer conditions on loans than typical U.S. financing rules do.

That was "one of the key decisions InBev made," Aquila says. "The financing risk was extremely low and ultimately allowed InBev to close in the midst of this unprecedented credit crunch."

JPMorgan Chase, Deutsche Bank, BNP Paribas, Banco Santander, and Fortis were among the main banks involved in the negotiations, lawyers on the deal say.

Antitrust regulators represented the last major hurdle, and they were toughest in the U.S. Anheuser brought in Howrey's Peter Moll for antitrust work, and the companies placated the Justice Department Monday when InBev agreed to sell Labatt's U.S. unit, an InBev subsidiary with a huge market share in upstate New York, to an unnamed third party.

Regulators in China and the U.K. approved the deal early Tuesday; Clifford Chance handled antitrust work for InBev in the U.K.

Other firms who worked on the deal included Linklaters for InBev and Simpson, Thacher & Bartlett, which represented A-B's independent board of directors.

Both Aquila and Paul Schnell, the lead Skadden partner on the M&A side of the deal, say it's the largest cash transaction they've ever worked on.

Other partners involved in the deal included: Yvonne Quinn, George Sampas, George White III, James Morphy and Theodore Edelman for S&C; Roderick McGillivray, Guy Norman and Philippe Hamer for Clifford Chance; Francois De Bauw and Ivo Onkelinx for Linklaters; Schnell and Thomas Greenberg at Skadden; and Charles "Casey" Cogut, John Finley, Eric Swedenburg, Michael Chepiga, Paul Curnin and Gregory Grogan for Simpson Thacher (Cogut is the global head of M&A for the firm).

For a full rundown of the deal's chronology, Reuters offers this helpful timeline.

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