As noted in our post of May 23, 2008, there have been rumors floating around about Anheuser Busch being acquired by InBev. After the market closed yesterday, that rumor became fact as the $46.3 billion offer went public. A combination of the two brewing giants would create the world’s largest brewer. Together InBev and Anheuser Busch own 300 brands selling in six continents and produce more than ten billion gallons of beer a year. InBev has aggressively acquired beer makers around the world but the U.S. market—the largest market for beer by profit—still eludes the company. The fact that the offer has been made public shows that one potential hurdle has been cleared. There was significant concern that InBev would not be able to secure funding for such a large deal in the current tight credit environment. Now, resistance by the Anheuser Busch board and the American public appear to be the remaining obstacles to completing the deal.
August A. Busch IV, great grandson of the founder of Anheuser Busch and current CEO, is vocally opposed to a merger. BUD’s stock performance has been impaired by increased material costs and some industry analysts consider the company “bloated” with substantial cost cutting opportunities. The acquisition price of $65 per share represents an 18% premium to the all time high (pre-takeover rumors) of just under $55 in 2002. Busch would prefer to remain at the helm and attempt to cut costs internally in order to boost the stock price, rather than sell the company to a foreign buyer. The Busch family owns four percent of shares outstanding, and while that is not enough to block a deal, the board has traditionally been loyal to the family. Furthermore, there is a strong contingent of beer consumers in the U.S. that view Budweiser as an American icon, hence the slogan: “The Great American Lager.” These loyal consumers are making their opposition known and do not want this great American brand to be held by a foreign company.
InBev wants Anheuser Busch and its large share of the American market very badly, and it has stated that it is willing to sweeten the deal to woo skeptics. InBev has said that it would be willing to adopt the Anheuser Busch name and move the company headquarters to St. Louis from Belgium. It has also promised that it would not close down any American breweries and claims that it will invite certain members of Anheuser Busch’s board onto the merged company’s board. InBev Chief Executive Carlos Brito attempted to ingratiate himself to the BUD board saying, “We respect the Anheuser-Busch board a lot … we admire them a lot and we think that the business rationale is very strong,”
The merger makes sense from a business standpoint and it follows the recent trend of brewer consolidation. InBev has secured financing, which was a big question mark in our mind when the rumors first surfaced. Now, the larger question is will the board and the beer drinking public accept the deal? Perhaps the board and shareholders could be won over by upping the price to maybe $70 per share–everyone has their price. However, the consumers whom BUD relies upon to buy its products may not be so easily swayed and winning them over will take a more sustained effort.
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