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Widmer Brothers Brewing and Redhook Ale Brewery will merge, creating a new company to be called the Craft Brewers Alliance.

Logistically it’s a buyout, with Redhook issuing 8 million new shares and paying about $50 million in stock to Widmer Brothers, which is privately held. Anheuser-Busch owns about a third of each company and will continue to own that much of the new corporation. The combined company will continue to be publicly traded on NASDAQ under the symbol HOOK.

Kurt Widmer, who with his brother founded the namesake brewer in 1984, will be chairman of the combined companies, while Redhook founder Paul Shipman will be chairman emeritus.

“I believe that the merger will allow us even greater opportunity to deliver unique and great-tasting beers for our customers,” Widmer said. “The two companies have a common goal — we both strive to brew the best possible beer for our customers.”

Shipman, 54, will effectively retire when the deal closes, receiving a severance package. He co-founded Redhook with Starbucks co-founder Gordon Bowker in 1981.

“I don’t plan to stop working, but I don’t plan to work in the beer business,” Shipman said. “I haven’t figured out what I’m going to do, but I have a penchant for alcoholic beverages.”

Both companies will keep their existing breweries, including Widmer’s breweries &#151 the company recently completed a major expansion &#151 in Portland and Redhook’s in Woodinville and Portsmouth, N.H. They also plan to continue making their existing beers.

Widmer owns a minority stakes in two other breweries, Kona Brewing in Hawaii and Goose Island Beer in Illinois.

Although brewing giant InBev’s profits increased in the third quarter, its stock took a hit because those were short of expectations – and the company warned that the increasing cost of ingredients will cut into profits next year.

The company reported rising sales in Latin America and Russia while sales in western Europe slumped. Sales were down 11% in Germany, in part because numbers were compared to 2006, when the country hosted the World Cup in Germany. Sales in Belgium decline 9.6%.

Volumes were up 10.7% in central and eastern Europe, with Russia growing by 14% and Ukraine by 14.9%. Latin America sales increased 7.3%.

Chief Executive Carlos Brito blamed the weaker-than-expected performance primarily on poor sales in the U.K. and China and the rising cost of raw materials that include malt and aluminum.

Although he expressed optimism about the fourth quarter, InBev company warned that increasing commodity prices, especially for barley and malt, will affect all its business units in 2008.

Business details from CNNMoney.

Boston Beer Co.’s share price slumped more than 25% Tuesday following the brewer’s announcement of disappointing third-quarter earnings that included a $3.9 million charge related to a federal tax audit that reduced earnings by 18 cents per share.

Stock of the brewer of Samuel Adams beer closed at $38.55, down $13.15 for the day, after trading as high as $53.42 before its 3 p.m. earnings release. It was down another 4% in early trading Wednesday.

The results included a $3.9 million provision for the possibility the company may owe additional excise taxes. An ongoing audit by the Federal Alcohol and Tobacco Tax and Trade Bureau could push the bill higher.

Third-quarter revenue rose 15.9 percent to $97.2 million, from $83.9 million, as the company sold 476,000 barrels compared with 432,000 barrels a year ago. Profit was hurt by an $8.6 million increase in the costs of goods sold, higher package material and ingredient costs and expenses from the temporary shutdown of its Cincinnati brewery for maintenance.

The company said it has completed due diligence related to its previously announced agreement to buy a brewery outside Allentown, Pa., and expects to begin brewing beer there next summer. It said it also expects to make further unspecified investments in its Sam Adams brewery in Cincinnati over the next three years to ensure a more reliable, efficient operation.

The Associated Press asks if the beer wars are back.

It appears that Anheuser-Busch might have been inclined not to respond to the latest advertisements from Miller Brewing about Miller Lite having more taste than Bud Light, but when Miller insulted A-B’s dog that was too much.

Milwaukee-based Miller’s new ad for Miller Lite, unveiled nationwide during football games and NASCAR events, features a Dalmatian on a wagon led by Clydesdales — the iconic horses synonymous with Anheuser-Busch, maker of top-selling Bud Light. In the distance, a Miller Lite truck appears, proclaiming “Miller Lite. Half the carbs of Bud Light” on the back. At a stop, the dog jumps into the Miller truck and rides away.

St. Louis-based Anheuser-Busch responded with a full-page ad in USA Today on Tuesday, complete with a picture of a Dalmatian, telling Miller to “keep up the bad work.”

“Apparently, Miller Beer believes they have to say negative things about our brands to sell their beer,” the ad said. “At Budweiser, we’re positive there’s a better way of doing things.”

The ad said Anheuser-Busch will make a donation to animal rescue groups across the U.S. in response to Miller’s ad.

New advertisements from Miller come at a time that the company is preparing to merge its U.S. operations with Molson Coors. It has been suggested that A-B, the nation’s largest brewing company, might have a competitive advantage if the second and third largest focus more on merging than competing with A-B.

Miller President and CEO Tom Long said in a note to distributors Tuesday that the company will air the ad this weekend during football games on several networks. It also will be posted on YouTube.

“The ‘able challenger’ is alive and well, and if A-B thought the Miller system would lose its competitive edge in the months to come, they don’t know us — or you — very well,” Long wrote.