Sunday, June 29, 2008

Don't Cry for Me, Saint Louis

There is schadenfreude in observing Anheuser-Busch's frenzied efforts to stay independent. After all, what the Belgian-Brazilian conglomerate InterBrew is attempting to do to A-B, A-B has done to others ... for years.

Yet, there is room for real concern. A foreign sale of an iconic American brand is an actionable metaphor for the diminishing international influence of the brand of America itself.

There are some recent interesting developments.

  • In part because A-B is considering increasing its debt load by about $10 billion dollars to purchase all of Grupo Modelo SA (of which it already owns half),
    InBev began taking legal steps Thursday to replace Anheuser's board, seeking a court ruling in Delaware clarifying that Anheuser shareholders could oust all 13 directors by written consent without cause.

  • Contrary to earlier reports, A-B has announced that it will NOT sell its Busch Garden amusement parks.

  • A-B has warned that InBev will cut jobs (which indeed InBev has done in aggressive fashion at previous purchases). Ironically, that is what A-B itself has announced it will do itself to save $1 billion dollars in operating costs by 2010. It also announced that it will raise prices and buy back shares.

  • A-B says that InBev, with its cash proffer of $65-a-share, has undervalued the company. There are rumors, however, that a bid in the $70s-per-share might be acceptable to the board.
    Anheuser estimates that the measures it is undertaking to improve earnings would result in a share price of $62, according to people familiar with the matter. That figure, however, doesn't include a takeover premium. Such premiums are typically in the range of 30%. Anheuser stock, which has been boosted by InBev's offer, closed on Friday at $62.26, up 91 cents, in 4 p.m. New York Stock Exchange composite trading.<...>

    InBev prefers a calculation that doesn't include Anheuser's 50% stake in Mexican brewer Grupo Modelo SA or its 27% stake in Chinese brewer Tsingtao. By that method, InBev's offer values Anheuser at 12 times 2007 earnings before interest, taxes, depreciation and amortization. <..>

    Anheuser prefers to reflect the value of both Modelo and Tsingtao, however. Including those holdings, it says InBev's offer is only worth 11.5 times Anheuser's 2007 Ebitda [earnings before interest, taxes, depreciation, and amortization]. What's more, it puts the value of other recent beer deals, including the purchase of Scottish & Newcastle PLC by Heineken NV and Carlsberg A/S in the 13-14 times Ebitda range.
Anheuser to Slash 1,000 Jobs, Raise Prices
Wall Street Journal
June 28, 2008

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