Status Report: Anheuser-Busch - InBev

The potential acquisition of Anheuser-Busch Cos. (BUD) by InBev become a very difficult situation to assess with any degree of confidence. First and foremost it will be stated that it is extremely difficult to conceive of a situation where the iconic BUD would agree to non-U.S. ownership for a variety of obvious reasons. Although just about every company has a sale price, this concept is not likely to apply in this scenario, regardless of shareholder sentiment.

Second, the prospect of BUD's market value dropping dramatically from a failed InBev takeover attempt (a la Yahoo (YHOO) in the Microsoft (MSFT) situation) may indeed be a compelling factor at the moment, but this should certainly be outweighed by the long-term implications.

Unlike many industries, such as the Internet, BUD's products will continue to thrive and be a major part of the U.S. social fabric (for better or worse) well into the foreseeable future. In other words, there is absolutely no rationale whatsoever for this transaction to take place from the perspective of BUD or its shareholders.

Finally, if InBev has any intentions of going hostile in this situation, the public and political repercussions would on a scale that would ultimately harm InBev's image and business in the U.S. It must be assumed that InBev is fully aware of this concept and will move forward with extreme caution.

Not surprisingly, reports are now surfacing that BUD has engaged in discussions with Modelo (Mexico) with respect to a potential combination as a means of dissuading InBev. This is obviously a rational move by BUD, although one that is not entirely necessary at this stage.

Currently, this publication can foresee no scenario in which InBev will actually succeed in its unsolicited offer, even if it increases its offer to an unusually high level.

Disclosure: We have no positions of any kind, in any security. We are a completely neutral source of research and analysis.

Comments

[maz:]

What was the point of this article? It added nothing to the debate that hasn't been hashed out many times over in other articles

2008 Jun 15 01:31 PM

[Reinko:]

Yes maz is correct, there is not much new.

For example the takeover sum is borrowed money is a little detail that is missing. The Mexicans are saying 'We want to stay Mexican' and thus the same argument that is applied on BUD goes for the Mexicans.

Furthermore there is the aspect of timing; if the Belgians only waited some time longer until we have 1.75 on the Euro/US$ pair they would be out far cheaper. On the other hand, waiting for the ECB to do the right thing is like waiting for Dubya passing an IQ test above 100...

2008 Jun 15 04:05 PM

[Tom Jacobs:]

Well, unlike the author, I am a shareholder and would gain much by the 30+% premium the offer represents to the company's value without it. Like Hershey, Bud continues to drag along under the direction of its corporate patricians. I think a little more efficiency in running the firm would be a good thing. Instead of a good return on investment I can look forward to Bud overpaying for Modelo and driving its price well below what it was pre-offer just to keep the Busch family in power - what good does that do for shareholders?

2008 Jun 15 07:40 PM

[User 211009:]

This article is propaganda, not an update. I find it completely amazing how some elitists find the nerve to spout their political agendas at the expense of everyone but themselves. Contrary to their claims, there is nothing neutral about this article. It is clear that the author couldn't care less about the interests of the shareholders. What a joke. The author says nothing about the potential economic benefits of a merger, or the obvious benefits to the shareholders, or how the corruption of our corporate structures are allowing the directors and officers to put their own personal self interest before the interests of the shareholders, or the hypocrosy of those (such as the author) who have the audacity to wave the American flag when convenient to promote their personal agendas and then turn around and burn it as an exercise of free speech.

2008 Jun 16 05:33 AM

[DLH:]

What a joke all of you are. You'd sell you mother out for a buck. Yes, AB could probably be a MORE profitable company. That's just what Wall Street wants...squeeze every ounce of profit. However, AB's already very profitable and think about all the good the company does around the country. Think about the great jobs the company provides, the charities that it supports, the theme parks that it operates, the Clydesdales, etc. AB is more than just another company...it's part of the American fabric. Maybe you all should have thought twice before you purchased AB stock. Does the stock provide a dividend? From my understanding the stock provides a very good dividend...but because it's not growing in value by leaps and bounds...you all want to cry about it. What a pity...what's next...selling the Statue of Liberty to the Arabs?

2008 Jun 16 09:53 AM

[User 211168:]

To DHL and the author:

Typical American reaction... It's ok when US companies take over companies in other countries but not the other way around. You pride yourselves in having a free and open economy but look for any way to a block a perfectly viable economic deal when it involves a takeover from a foreign company.

What BUD faces today, other companies in other countries regularly face from US companies. It's just part of a democratic and free society.

You might not like having foreign companies taking over US companies but you should get used to it as the US$ will not get any stronger (with the huge US debt Bush has build) and will only make it more appealing for foreign companies to buy US companies.

If your economy works as it should, this deal will go through.

2008 Jun 16 12:02 PM

[DLH:]

The US has lost tens of thousands of jobs to overseas competition. Many, many companies here in the US have been purchased by foreign companies...what world are you living in (I’ve witnessed this personally). The US not only provides the rest of the world with a living because we purchase everyone else’s goods but also provide for the worlds security. A simple thank would be nice. How typical of foreigners. Whine, whine, whine…all you have to do is work hard and not complain about not being able to take long vacations or work a little OT.

As for AB, this is a company wrapped in the fabric of America. Kind of like baseball and apple pie. Judging by your comments, I'm thinking your not from these parts and wouldn't have any idea what I'm talking about. You'd rather watch some 3 to 4 hour long game where dudes dressed in silk outer wear chase each other around a field full of nothing kicking a white and black spotted ball only to end their game in a zero - zero score. Anheuser-Busch has 50% of the American market because Americans love their country and theirs nothing more American than watching a football game American style on a Sunday afternoon and drinking a nice cold frosty Bud. If AB's not American anymore...then why support the product. To be honest…there’s not that big a difference between AB products and the rest of the American beers. AB’s currently the last American lager. European beer tasts like…well…goat p%#s. And...if InBev does purchase AB there's going to be lot of disgruntled beer drinkers in this great country that won't buy AB or former AB products (me for one) and InBev can choke on their debt / new purchase. InBev better be very careful on this one…what’s their purchase going to look like when their size of the US market drops from 50% to about 15%??

2008 Jun 16 01:42 PM

[truthinvesting:]

Molson and Miller are bothe foreign companies. The Busch family has been granting themselves cheap options and then selling them the minute they get them. Warren Buffett is going to get involved according to David faber of CNBC and my guess is he wll either buy BUD and let Im Bev run it in some type of partnership or support Im Bev's buy out. Busch family has 4% of the vote and umber 2 and Number 3 beercompanies in US are already foreign owned.US sends too much money overseas in trade deficits andthis kind of takeover is inevitable

2008 Jun 16 06:17 PM

[truthinvesting:]

Like i said inevitable

2008 Jul 12 10:07 AM