InBev announced an unsolicited $46 billion bid for Anheuser-Busch (BUD, $62.70, up $4.35) after the market closed on Wednesday pushing the shares higher at the open this morning. AB said it would “evaluate” the $65 a share offer but many believe InBev is going to need to raise the bid to at least $70.

I’ve been covering this story for nearly a month and you could feel a deal was in the making especially when rumors surfaced that InBev was trying to finance $50 billion. You can almost bet AB’s board will try and negotiate a better price but they don’t have that many options (no pun intended). But we do.

The June 55 calls (BUDFK, $7.40, up $3.30) were profiled at $3.10 and have easily doubled. The June 60 calls (BUDFL, $2.80, up $1.75) were going for $1.20. If you purchased any of the June option contracts don’t forget they expire next Friday, June 20. The June calls could trade higher but time decay will really start to pick up next week so it is important that you monitor these closely.

The July calls still have plenty of time for a higher offer to come out but they should be watched just as tight. The July 60 calls (BUDGL, $4.00, up $0.10) were profiled on 6/2 at $2.00 and are now in-the-money. The July 65 calls (BUDGM, $0.85, up $0.30) are still out-of-the-money and were trading at $0.40 at the time. These calls didn’t get the pop that the others did because the offer is at $65. If InBev does raise its bid for AB to $70 sometime before July 18, then these calls should do well. However, keep in mind that the July 65’s will need a higher bid to get in-the-money.

Rick Rouse
Rick@OptionsMentoring.com

There are reports out that Belgian brewer InBev is interested in making a bid for Anheuser-Busch (BUD, $56.13, up $3.55). The offer could be in the range of $46-$50 billion. Of course, AB said it was their “policy to not confirm, deny or speculate on rumors of potential investments, acquisitions, mergers, new business partnerships or other transactions.”

The offer would supposedly be worth $65 a share, but InBev was “not about to push the button.” Shares of AB have traded to a high of $58 today as it is believed that InBev has been talking with JPMorgan and Santander about financing $50 billion.

A deal between InBev-Anheuser has been in the works as early as 2007 and nothing is imminent. However, now would be the best time to for InBev to buy AB as raw material costs continue higher and the fact that the euro is much stronger than the dollar right now.

Whether a deal is consumed or not there has been considerable action in the June call options. The June 55 calls (BUDFK, $3.10, up $1.95) are up 170% as 45,000 contracts have traded. The 55’s have traded as high as $4.50. The June 60 calls (BUDFL, $1.20, up $0.84) are up 233% and hit a high of $1.90 earlier in the session. Over 70,000 contracts have traded so far today.

Be careful jumping into the action as the options are trading at a premium right now.

Rick Rouse
Rick@OptionsMentoring.com