Sunday, May 25, 2008

Bud to be sold? part 3

Not that had any insider information, but we did post here earlier on rumors that the faceless brewing conglomerate InBev was planning a takeover bid of Anheuser-Busch, brewer of the newly-branded Great American Lager, Budweiser.

[UPDATE 2008.05,27: Shares in Belgian brewer InBev (INTB.BR), the world's second-biggest by volume, lost over three percent on Tuesday after a newspaper reported it could start takeover talks with rival Anheuser Busch (BUD.N) on Tuesday. Reuters story]

My point then, and now, is that A-B is the stronger brewery and corporation, and thus it could be the leader in any merger. But I'm no mergers and acquisitions expert.

Amid renewed speculation (Friday, A-B's stock jumped to $56.61, its highest point ever) the Wall Street Journal has pointed out that

now may be the time to strike given how the depreciating dollar makes U.S. corporate assets cheaper for foreign buyers

The rich are indeed different than many of us (or at least me). They can silently re-order our lives and culture in big ways.
activist shareholders [have been] buying up Anheuser-Busch shares in recent days, according to people familiar with the matter. It's unclear who these holders are or the size of their stakes. But they could be critical to any takeover drama, as the investors may use their voting blocs to push for a company sale.

A-B has real problems, some of which are delineated by Lew Bryson at CondeNast
Its iconic core brand, Budweiser, continues a slow 20-year slide that has left it at roughly half of its peak sales of 50.5 million barrels in 1988. Bud is still huge (at 24.6 million barrels in 2007) and still the second-biggest brand in the market after stablemate Bud Light <...>

Budweiser and Bud Light make up over two-thirds of the company's sales; Bud is still dropping, and Bud Light has hit a wall. The company has not had a solid hit since Michelob Ultra in 2002 <...> a real innovation, the first low-carb beer, and it has crushed imitators.

A-B could adopt a poison pill strategy, the Wall Street Journal mused.

Some industry analysts say one way Anheuser might try to fend off InBev would be to acquire the 50% of Mexican brewer Grupo Modelo SA that it doesn't already own.<...>Anheuser would likely have to pay in the range of $10 billion for Modelo. Such a deal might make Anheuser too expensive for InBev to afford.

After Mom, Chevrolet, and apple pie, Budweiser is a quintessential 150 year+ American icon. Regardless of how we craft beer geeks may feel about the flavors of Anheuser-Busch's products and about its corporate culture, losing the brewery to foreign vultures would be a painful symbol of America's diminishing economic hegemony.
Anheuser Chief Executive August A. Busch IV, 43 years old, has reacted coolly to the approach, telling beer distributors in April that the company started by his great-great grandfather, Adolphus Busch, wouldn't be taken over "on my watch," according to people familiar with the matter.<...>

It's unclear just what kind of defense the Busch family could erect. The family owns less than 4% of Anheuser shares

If the sale happens, there will be no more surviving large American-owned breweries. (Sorry Boston Beer, Sierra Nevada, Yeungling, F.X. Matt). No more independent Miller, no Coors, no Pabst, no Schlitz, no National (as in Baltimore's Natty Boh, hon.)

Will American consumers care, or will they be quiescent, as they were as A-B and its brethren came to this logical endgame, buying and closing our local breweries?

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