The New York Times and Wall Street Journal are reporting that InBev (INBVF.PK) agreed to raise its bid for Anheuser Busch (BUD) to $70 per share (see InBev Raises its Offer, InBev Boosts Offer). This raises the premium offered for AB from about 30% to nearly 40%. As a consequence, AB has agreed to consider the offer, and has opened lines of communication with InBev.
I applaud the two firms for ratcheting down the hostilities. I also applaud them for recognizing that this is a deal worth discussing (and considering) rather than bickering over. AB’s rebuke of InBev’s initial offer was a blunder. InBev followed that blunder with one of their own, by taking the issue directly to the AB shareholders, drawing the ire of U.S. politicians and consumers in the process.
Personally, I think much of the credit for bringing the two parties together belongs to Adolphus Busch IV (uncle to August Busch IV, the current CEO). When this deal turned hostile, InBev decided to offer its own slate of directors to oust AB’s current board. It so happens that one of those proposed directors was Adolphus Busch IV (I’d actually be interested to know the back-story for why he agreed to serve as a director on the competing slate). As reported by The Economist last week (business brief, sorry no link):
InBev, a Belgian brewer, intensified its efforts to win Anheuser-Busch by nominating an alternative board. The slate included Adolphus Busch IV, who wants the Busch family to negotiate with InBev. He is an uncle of Anheuser’s chief executive.
Provided that talks between InBev and AB do not break down, we can now all turn our attention where it rightfully belongs - to the issue of how InBev will create value by bringing these two firms together. As I have mentioned in previous posts (see Ambush by InBev and Anheuser’s First Ploy), there are lots of reasons to bring these firms together - there are some real distributional and operational synergies. However, as with any deal, achieving synergies can be difficult (see Why M&A Deals Go Bad), …especially for cross-border mega-deals of this sort (see DaimlerChrysler Post Mortem for a case in point).
Then there’s also the issue of whether or not the deal has become too rich - whether the achieved synergies will more than compensate for the premium.
Although the deal is getting friendlier, it has also gotten pricier…