Are American Companies Now Up For Grabs?

InBev (INBVF.PK), a Belgian brewing company, is currently trying to take over Anheuser-Busch (BUD) at $70 per share or $50 billion dollars. The deal, when first announced on June 11th, was for $65 a share. Anheuser-Busch put up a strong obejction and the potential deal quickly got acrimonious. InBev last week raised the price to $70 and Anheuser-Busch has now indicated it will enter into friendly talks with Inbev

There probably aren't that many more companies that are more "American" than Anheuser-Busch, the maker of Budweiser, and it would be a shame to see it fall into foreign ownership.

As mind-numbing as the $50 billion price tag sounds, if the deal goes through, InBev will actually be getting Anheuser-Busch for cheap, relatively speaking.

Since August 1st of last year, the dollar has lost about 12 percent of its value to the Euro. If the economy continues to deteriorate, and we see a nationalization of Fannie Mae (FNM) and/or Freddie Mac (FRE), or the government has to spend more on social programs to help offset a failing economy, thereby increasing its debt and budget deficit, that may further weaken the dollar as foreign buyers of US government bonds start worrying about the safety of their money. A weaker dollar makes other currencies more valuable, and investors in those countries might start looking at America as one big shopping mall.

Additionally, if things get worse and the stock prices of American companies continue falling, lowering their market capitalization and valuation, that will only exacerbate the problem.

There is another factor that may further serve to send American companies into the arms of foreign buyers. Investment banks in the US are all being faced with an assault on most if not all fronts of their businesses and their profit outlook is not so bright.

1. Their structured finance divisions, that package and securitize assets for sale to their clients, have all but been decimated, thanks to the collapse of the mortgage market.
2. As the market continues to decline, more retail investors will trade less and this will lower the commissions their brokerage divisions generate.
3. The current state of the market is not conducive for IPOs, so that very lucrative business has also lessened.

As a result, they will obviously be looking for ways to shore up their revenues. Faced with this situation, they would be remiss if they did not start soliciting foreign investors with proposals for the takeover of American companies that can be bought for very cheap because of the currency and low market cap advantage.

Other sales of very American companies/properties to foreign investors recently:

• On Tuesday, July 8th, the Abu Dhabi government bought a 90 percent stake in the iconic Chrysler Building in New York for $800 million. Admittedly, that stake was already in the hands of German owners.
• In May of this year, the GM Building in New York and three other Macklowe/Equity Portfolio properties were sold for $3.95 billion to an investor group comprised of the sovereign wealth funds of Kuwait and Qatar as well Boston Properties, an American company.

This is probably just the beginning.

 

Comments

[DrBagel]

The free market works this way. Let them come. Let them buy. Inbev wants to earn Dollars. Deals like this are healthy and will contribute to Dollar strength.

[bbzz24]

Won't the dollars they earn depreciate or only the lump sum they will pay will look more attractive with the time?

[DrBagel]

Clearly Inbev wants to be part of US business in the years going forward. If the lump sum will look better in the future then why not wait to buy. You dont buy something because you expect it to depreciate.

[User 164258]

Mr. Shepard,

I really don't understand what point your are trying to make here or if there is one.

Is it bad that a Belgian company buys BUD? You make it sound like a crime against nature. Do you think they will change the taste of the beer? Maybe they will send the Clydesdales to the glue factory and bring in Belgian work horses instead? It seems to me that many Americans only believe in free markets when we are the buyer. What would happen if BUD bought out the remaining stake in Modello? Would you be writing an article about how bad it is that Mexico just lost an iconic brand to an Amercian company? What really makes me laugh is how some people equate the sale of BUD to foreign company as the same thing as selling national security interests. It isn't. It is just a beer company. The Bush family has had years to create value for shareholders, which in my opinion they have not done. In a free enterprise economy, that is what matters. Its about time someone came in and realized the value in this company, be he Belgian or Martian.

Maybe your point is that the dollar is down so foreign companies will find assets in America cheaper than they were a year ago? I don't think that requires rocket science. I was hoping you would make some suggestions about which companies would be especially likely to be bought and why. That would have some value.

As for your analysis of investment banks, again what is your point?? Is it that because their profits are down they will stoop to advising European companies about acquiring US businesses?? Is that bad?? I thought that is what investment banks did - advise companies on M&A regardless of their national affiliation. Is that is lower margin business than selling stock to Mr and Mrs Retail Investor and should only be pursued as a last resort? I doubt it. Are European companies and investment banks so stupid that they would not be able to figure out on their own American companies look cheaper after the decline in the dollar? Again, I doubt it. Those little Europeans can occasionally be pretty smart all by themselves so you had better hide your women and children.

My suggestion to you is think before you write.

[sorgmot]

Interesting discussion of buyer motivations. Maybe the buyer gets farm lands and factories and patents and other real assets which are appreciating in US $ values by selling US $ bonds which are decling in real US buying power.

[AmesTiedeman]

Of course they are up for grabs. We have destroyed our own currency so now we can be bought on the cheap.

[captbob]

A company like Inbev is not just stumbling around in the dark.
If you look at history--What Industry/business improves in a recession or depression??
#1 On the list is alcoholic beverages! Do you think they know something we don't??
The dollar is cooked-just stick a fork in it. That's another reason Inbev got a deal they bought with euros which is a 35% discount right in the exchange + lower stock value=bargain.
There is a lot of Bud sold abroad, we'll retain the payroll--I hope, but that amount of trade balance will now go to Belgium, that does not help the dollar!!

[KOB]

InBev will eliminate workers and crush yet another middle class institution by killing off organized labor... Google InBev Unions and you will see that the jobs that were part of the American Icon "The King Of Beers" will be lost forever. The banks may have extended InBev the virtual funding for their greedy deed... but is it real? Will Americans continue to buy a BUD, BUD LIGHT or a Michelob? InBev is taking a chance... The middle class no longer have a voice... It's all about GREED OF THE CORPORATIONS.

[fatcat]

In the 70s and early 80s the Japs bought up everything,most they don't own today....think Pebble Beach. We can always tax and inflate them out of their holdings...

[carey_jim]

The Arab countries have monarchic and totalitarian governments, they are not free-enterprise economies.

China is still communist.

Putin is a communist.

Europe is still quasi-socialist and can revert to socialism after any election.

We have rules about who to sell to, both written and unwritten:

America wont sell its radio and television broadcasting stations to China.

We wont outsource atomic bomb building to Russia.

We WILL sell beer making companies to Europeans (they make much better beer.)

We WILL sell our fast food chains to France and China.

There was even a rumor that Mohamar Khaddafi offered three trillion dollars to buy the NFL but George Bush refused because Khaddafi wouldn't allow him to play quarterback for the Tripoli Cowboys.

[User 188055]

I find it is normal if an european company swallowed an US Big Dog with a long time tradition. Time of "Globalisation&qu... has been allowed all possibilities (even promoted by the US Administraion) to buy /sell all around the world. Pls. don't forget, how may US Companies are involved in firms in other countries. Money and the lobbying are the main facts which count. Forget hard work, honor or pride.

[delta7777]

Back in the Vietnamese war era, Ho Chih Minh regarded opium and cocaine as wonderful weapons.....you coud sell them to enemy troops and actually get a country to pay you for this weapon that would efficiently and insidiously destroy the enemy.........

Somewhat in the same vein....there is very good reason for middle eastern oil countries to not foment war against the US--having learned from the Chinese that it is far simpler to take your time and simply buy it up with its own money at a liesurely pace (and receive thanks for doing so)....

[nova]

The Bush administration, the Congress and the Fed are ruining American economy and US$.

Consequently, the best American businesses will be sold to foreign entities.

The "world Free" economy long-term consequences are simple: either American workers will work for Chinese wages or Chinese will be paid by American standards? Since the later is impossible then American wages will go down a big way!

[TraderGreg]

We will sell Viagra to China, Russia, Vietnam....and we will be rich again!

[KOB]

And when the profits come in to these offshore owned companies... where will those profits go? an In Bev owned Anheuser-Busch will no longer be investing in local communities... chances are that the canned water donations to those that suffer future natural disasters will no longer be a common event... the list is long...Our children's children will one day be the servants of the wealthy foreign countries of the world... Thanks to our American Leaders... George Carlin was right... Americans are a bunch of idiots... It's the American idiots that voted in our American Idiot Leaders!

[captbob]

Trader: I don't know if you've noticed but trade with Asia is one way--into the wind. If Viagra were wanted China would simply copy it, till then the African rhinos are disguising their horns as termite mounds.

[notsosmart]

i think some of the dumb-dumber americans are beginning to wake up. maybe too late.i read on this website that of the 100 largest financial entities in the world today 49 are corps. &51 are countries.if this is true these greedy businesses will run everything.see the coming world-check out the film"rollerball&q...

[abemp]

As a employee of Anheuser-Busch I am very upset. Most of the news media reports are distorted about AB. I think everybody is missing the fact the money we make now that comes into the United States is now going to Belgium. 2Billion plus per year. All of you fee economists how does sending this kind of money outside our country help our economy. I dare anybody reading this to explain this to me and the rest of the readers here. Go ahead I am listening......

[34rules]

If you look at the market caps of GM and F, they are so low that anyone can buy the whole company, dump the unions and all their retirement benefits,hire non union labor, and probably make alot of money making cars that will be cheaper with lower labor costs.

[Beennice]

As an employee of AB I can say it has been good. But I know we are in an economy which has to adapt. We as individuals have to do just that. I have heard alot of blame toward the Busch family. Shame on you. This company has provided alot for this country. We now must thank them and adapt ourselves.

[User 199792]

I encourage them to buy our properties. They can not take them overseas, and they have a vested interest in keeping our shores safe and strong

[Gltoffic]

I for one think that the "crime" being committed here is that AB does not demand that InBev acquire it for InBev "shares" at a locked in $65 per share. The combination makes sense, the debt does not.

InBev trades in the pinks but would be hustled right to the front of the line at the NYSE for the Bud shareholders. Although since InBev's current quote is about $70, a share for share might be fine with a downside collar.

If anyone will note InBev was trading at $95 before the cash offer. I am willing to bet you take the upcoming debt off the table and $95 will be pretty much down the road sooner than later.

Then the BUD shareholders can own, tax free, a major chunk of a worldwide company. I am also open to a cash/stock offer if it brings the upcoming debt levels down dramatically.

I think instead of wringing our hands at "foreign" takeovers, we should be standing back, seeing if the combinations make sense, and then demanding shares if they do.

There are probably well north of a thousand US companies that would tuck quite nicely into a foreign firm.

If you really want to do something to hedge the falling dollar it is to be looking to nip/tuck thousands of US mid sized companies with the thousands of growing and or cash cow companies the world wide. And taking/demanding shares intead of cash.

That being said there are also well north of a thousand foreign firms that will fit nicely into an American company in the next year or two. It is a two way street. I never hear complaints about the other direction.

(As an example here are but three other merger (shares for shares) examples that I would love someone to see make happen......

SCMWY/CBG

FMX/BG/CPO

BPR/OXY

.....but that is for another time).

[swaps]

GLtoffic makes a lot of sense arguing for a stock swap. But that is exactly why InBev is making an all-cash offer. Otherwise the American Trojans would be inside their gates.

I live in Colorado but buy Bud more than Coors. But if InBev starts killing off American employees my couple of beers a year will go to ..not Molson-Coors-Miller .. but an indie craft brewer, if I can find one that is not a front for a major.

While you free-market gurus on these boards love the deconstruction of the U. S., I point out that it was the controlled market Federal Reserve at the center of the spider web that created the weak dollar, the financialization meltdown and now, the further erosion of U. S. corporate sovereignity.

Everything the Congress and Senate and President have deregulated - from airlines to now banks (both investment and retail) - have resulted in disasters.

Suppose it is natural that foreigners would swoop in and pick up the wreckage.

And, yes, the flow of money back and forth across borders is wonderful but the playing fields are still uneven. When I tendered my Brazilian telephone shares last week for $43 a share - some bought as low at $15 - the Brazilian Exchange will take a 15 percent cut off the top. That's what they are free to do. Fortunately these shares were within a tax sheltered account or the "free market" scalping would have been worse.

Globalization is really a two-edged sword, and fortunately even a few thousand U. S. economics will eventually see their mundame jobs outsourced overseas.

DaN


Dan

[deee]

I just read that Toyota is closing down their truck plant in Texas, but will pay the employees till it opens again in Nov. I am sure no union would have negotiated this.


On Jul 13 03:12 PM 34rules wrote:

> If you look at the market caps of GM and F, they are so low that
> anyone can buy the whole company, dump the unions and all their retirement
> benefits,hire non union labor, and probably make alot of money making
> cars that will be cheaper with lower labor costs.

[KPO'M]

Where were all the flag-wavers when Miller sold to South African Breweries? Now SABMiller is merging its North American operations with a Canadian brewer (Molson-Coors), and I still hear no complaining. Why is Anheuser-Busch any different?

[exbudman]

To Beenice: I am also an AB employee. August the 3rd came to Columbus a few years ago and wanted to know what we as managers would do in his position? Should we go into the spirits market or what? I wish we could have given him better advice. Now that August the 4th has given away his heritage I hope we the employees can get past this. I think that I will give up on beer and go back to drinking Rum.

[User 164258]

Wow, I can't believe the stupid reactions to the sale of BUD. KOB, do you really think Inbev bought this company for $70 to lose all its customers. Have you stopped drinking Smiroff vodka becasue DEO owns it? Has DEO sucked all their profits out of America? No they have a lot of operations in the US and support local economies. Maybe they should open an amusement park and you would be happier.

Come On!!!! The US has spent away a lot of its capital for years. So what if a beer company is bought by a European company? It will work itself out

[User 151901]

I live in Canada and as such I've seen how for years - decades - the US has been hammering Canada and as such I assume a lot of other countries as well - about their business practices. When the Canadian government has blocked or even questioned a US business buying out a Canadian owned one, it's been made perfectly clear that the US will not tolerate government meddling into the private sector and free enterprise.
It's been made clear that the US will use any and all means to punish Canadians should we try to assert out nationality through retaining these businesses. Now that the shoe is on the other foot, people are crying foul. I really hope the United States doesn't expect much sympathy from people in other countries.
Don't get me wrong, I do understand the plight faced by those whose jobs are jeopardized with this venture. But this is the free enterprise model that the United States has used to it's advantage in other places for a long time. It has to go both ways for it to be really "free"

[BS Detector]

Yes, the U.S. is on sale. Just as Canada was on sale a decade ago, just as Europe was on sale in the mid-80s. What does this mean for us? We should follow InBev's lead and have more of our investments in U.S. companies and less in foreign companies. The upside probability for the dollar is greater than the downside.

[PIA]

In 1990 Japan and Persian Gulf states awash with US Dollars invested heavily into US Markets buying American icons like Pebble Beach, Kiawah Island, Rockefeller Center & the Seattle Mariners, etc.

Free Markets will again allow our excessed and failures to be cleansed and currency flows and market medicine will prevail allow for the next American rebirth.

Hopefully, our Socialist Congress or comrade Obama will allow the proven tonics of the correcting and free markets to prevail this time.

[Tom B]

Lord knows, American MBA's have proved themselves utterly incompetent. Individual circumstances will vary, but sometimes foreign ownership does NOT mean job loss inevitably. Certainly, ones chances as a worker do not seem worse than under American overpaid cretin CEO's.

[User 227179]

It's amazing how anything can be justified in making a profit. Hell, let's sell everything to foreign interests, Bud, the White House, Yosemite, Yellowstone, our defense industry and anything else that can raise a quick buck. We will enjoy working for our foreign masters. One thing I would truly like to sell are the sell-outs in Washington. Oh, but I forgot, they have already sold themselves to the lobbyists. They are already sold. No sale there. Those people I would have gladly GIVEN away. No economics Ph.D. needed. A simple high school education will suffice to show you where we are headed.