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InBev-Busch Deal Spooks Investors, but They're Wrong

Ever since the financial crisis hit last month, people have been wondering about the InBev-Anheuser Busch merger. Will it go through?

inbevYes, it almost certainly will. The main reason is that the $52 billion deal has solid financing behind it. And as the Dow Jones news service pointed out on Thursday, "selling beer is a solid business, even during a recession."

Nevertheless, Dow Jones noted, "investors appear nervous," as shown by Busch's stock price, which closed Friday at $62.03, or about 8 bucks below the deal price.

But that deal price, $70, is also $10 more than Busch's highest-ever stock price. And $45 billion of the sale price will be financed with debt, which in the current climate can't help but spook investors.

But beer throws off cash, and people buy beer even during hard times. The underpinnings of the deal, and of the combined company's ability to service its debt, are pretty much the same as they were a few months ago.

And, as Dow Jones, notes, the debt will likely be rated highly, which will make it easy enough for banks to sell it off.

There is a better chance that the deal would be renegotiated, but even here, the chances seem slim. InBev would have to pay a termination fee of $1.25 billion, which shareholders approved at the end of September, when the financial crisis was as a particularly scare point.

"The agreement that InBev has signed with Anheuser is pretty airtight," said Trevor Stirling, an analyst at Sanford Bernstein, told Dow Jones.

And he's like most other analysts, who, unlike some investors, are convinced that the deal will go through.

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