Bud Light Lime, Not Potential InBev Takeover Boosting Anheuser-Busch

Forget a potential $46-billion takeover by InBev NV (INBVF.PK), it will be Bud Light Lime that gives shares of Anheuser-Busch Cos. (BUD), the world’s second-largest brewer, a much-needed lift. This from Deutsche Bank’s Marc Greenberg, who told clients:

Summer’s here: Bud Light Lime’s the beer.

InBev is the world’s biggest brewer by volume and was created through the merger of Interbrew and AmBev. It makes beers like Brahma, Stella Artois and Beck’s, which has some dubbing the potential tie-up “Bud and Beck’s.”

Mr. Greenberg raised his 2008 domestic volume estimate for Anheuser-Busch from 1.5% to 1.8%, taking earnings per share up a penny to $3.05, after 25 of the brewer’s major distributors responded positively to Bud Light Lime in a recent survey. He maintained his “buy” recommendation and boosted his price target by $1 to $56 per share.

The new beer’s late April launch is on track to be very successful, with retail penetration at 70% to 80% in less than four weeks, the analyst told clients. It also has demonstrated the ability to capture non-beer drinkers, he noted.

As far as the potential takeover by InBev, Mr. Greenberg said the necessary premium of at least 20%, or more than $65, is hard to justify given the limited geographic overlap and scope for revenue synergies. He said InBev would need at least $600-million in annual pre-tax savings to make the deal work.

Comments

[ThisBudIs F...:]

Finally someone has figured it out. Yes Budlight lime will be huge this summer. Biggest launch since Mic Ultra. Miller Chill is now dead in the water. Landshark doing well as well. Bud American Ale coming to a store to you soon this fall will be huge as well.

2008 May 25 11:43 AM

[abemp:]

Mr. Greenberg has it correct. As a long time employee of Anheuser-Busch I can tell you we have been diligently working for years to become as efficient as possible without impacting product quality. As a matter of record we already have enviable production efficiencies and technological advantages that most brewers would love to have. There are additional steps that can be taken to reduce costs and from what I have seen we are on target to accomplish all of these steps. I am a stock holder and would love to see the stock increase in value. My concern is that from where I sit I agree with Mr. Greenberg, there just is no way, even with draconian cuts can INBEV achieve $600-million in annual pre-tax savings. I am conservative and know that you can’t turn a big ship like AB overnight but I believe in my heart that in the long run Anheuser-Busch will provide better returns to the investors than if there is a hostile takeover with INBEV at the helm.

2008 May 26 02:38 AM

[mobud_1:]

Touche' - AB Emplyee.
I am likewise an A-B employee.
InBev has a tradition of "cut throat" cost cutting. The cultue shock between the 2 companies couldn't be any worse. Long-time holders of A-B stock have been well rewarded. Not the case over the last 6 years, but that will change.
Go Bud Light Lime!

2008 May 26 03:45 PM

[Schlitzfits:]

So the effort that AB went to cannibalizing Blue Moon with "shocktop" is going to work out to cannibalize Miller Chill? Puh-leeze.

2008 May 26 06:06 PM

[mobud_1:]

miller chill, not blue moon

2008 May 26 07:04 PM

[muguwmper12:]

As a BUD shareholder, I've been interested in just doing a bit of personal observation. Spent Memorial Day weekend in Corpus Christi, Texas, and noticed that I saw Bud Lime being consumed everywhere we went. We went a couple places to pick up 6-packs and it was sold out. That's a good launch!

2008 May 26 08:30 PM

[x-ab employee:]

Not sure if this bud lt lime is the real catalyst for the stock jump, though I am glad to see it. BUd Select was also a great launch and was the fastest growing new beer 2 years ago only to fizzle out. The problem with new beer launches is that they cannibalize the existing brands, Bud Lt in this case. My company has been owned for the last 27+ years by AB and they are finishing the deal to sell to our competitor on the 1st of June. This may be the cause for the raising stock price, who knows. Not sure of the sales price, but it could be in the neighborhood of $50 mill? So whatever happens to AB is not that important to me as long as the stock goes up as high as possible before I roll my 401k over to new company. A rumoured $65-68 share buyout from Inbev is enticing for a stock that I have been holding for 6 years that has been basically flat. Cheers!

2008 May 29 09:57 AM

[beer fan:]

One thing that cannot be overlooked is the charitable work that AB provides to so many philanthopies and organizations. AB was built on values of "Making Friends is our Business"... I understand from a financial side that stock holders would love to see the price over $60-65/share, but something that shouldn't be an oversight is that the company continues to test the waters for new ideas and innovations to grow the company. As for smaller, US regional craft brewers... I understand how people percieve the big bully or mega brewer mentality of pushing around the little guys, but make no bones about it... because of AB's wholesaler network, many of these smaller brewers get enormous coverage and can offer their products to a much larger audience that they would never have been able to do through their distribution channels.

My hope is that AB stays an American based company as it stands for everything that is American. Hopefully the shareholders see the value of that and can reap the rewards of increased stock prices from growth within and not from a takeover or merger.

2008 Jun 06 05:23 PM