By David Silver
Here's to you, Belgian/Brazilian Beer Maker. You don't let a little thing like a CEO get in the way of what you want. August Busch IV said "not on my watch," but you didn't listen. So grab a cold Bud Light as you attempt to become the largest brewer in the world, producing more than 10 billion gallons of suds.
After the closing bell on June 11, it was reported that Belgian/Brazilian giant InBev made an unsolicited $65 per share offer for Anheuser-Busch (NYSE:BUD). With more than 713 million shares outstanding, the bid is valued at more than $46.3 billion. AB's board of directors will evaluate the proposal and make its decision to InBev's proposal "in due course." The $65 per share price is a roughly 24% premium to Anheuser-Busch's closing price of $52.58 a share May 22 this year, the day before a Financial Times blog cited anonymous sources who said InBev was preparing its bid for AB.
All the cards are now on the table and the American icon is in jeopardy of falling into foreign hands. Don't misunderstand; there are no xenophobic undertones to that statement, but for the largest brewer in America, which holds approximately 50% of the light beer market, to potentially be under the control of the second largest brewer in terms of volume poses an interesting conundrum for policy makers, the Governor of Missouri, Matt Blunt, and other activist investors have already vowed to fight the proposed takeover.
We think the deal makes good sense, and InBev is striking while the iron is hot. The beer industry is in the midst of a face lift and consolidation is becoming the name of the game to capitalize on distribution and production synergies. InBev would open up the world market much more for AB products, while InBev would receive instant access to one of the most diverse and extensive distribution networks in the United States. The Board of Directors (including some of the Busch family) have indicated that their actions would be inline with what is best for shareholders, not preserving the family's legacy or Company's history of independence. If we were sitting on the board of AB, we would vote in favor of the deal. We feel however that the Board of Directors will force InBev to do a hostile takeover, or increase its share price. AB still holds the "poison pill" that could make the acquisition too expensive; it could purchase the remaining 50% of the Mexican brewer Modelo's shares.
The Company has resisted takeover attempts before, and current CEO August Busch IV did say that AB would not be sold "on his watch." If management is sincere with its desire to do what is best for shareholders it will accept InBev's offer. We believe there will be a battle.