Are American Companies Now Up For Grabs?

 |  Includes: AHBIF, FMCC, FNMA
by: Daniel Shepard

InBev (INBVF.PK), a Belgian brewing company, is currently trying to take over Anheuser-Busch (NYSE: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.