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
