Inbev and Anheuser: Cooler Heads Prevail
July 11th, 2008The New York Times and Wall Street Journal are reporting that Inbev agreed to raise its bid for Anheuser Busch to $70 per share (see Inbev Raises its Offer, Inbev Boosts Offer). This raises the premium offered for AB from about 30% to nearly 40%. As a consequence, AB has agreed to consider the offer, and has opened lines of communication with Inbev.
I applaud the two firms for ratcheting down the hostilities. I also applaud them for recognizing that this is a deal worth discussing (and considering) rather than bickering over. AB’s rebuke of Inbev’s initial offer was a blunder. Inbev followed that blunder with one of their own, by taking the issue directly to the AB shareholders, drawing the ire of U.S. politicians and consumers in the process.
Personally, I think much of the credit for bringing the two parties together belongs to Adolphus Busch IV (uncle to August Busch IV, the current CEO). When this deal turned hostile, Inbev decided to offer its own slate of directors to oust AB’s current board. It so happens that one of those proposed directors was Adolphus Busch IV (I’d actually be interested to know the back-story for why he agreed to serve as a director on the competing slate). As reported by The Economist last week (business brief, sorry no link):
InBev, a Belgian brewer, intensified its efforts to win Anheuser-Busch by nominating an alternative board. The slate included Adolphus Busch IV, who wants the Busch family to negotiate with InBev. He is an uncle of Anheuser’s chief executive.
Provided that talks between Inbev and AB do not breakdown, we can now all turn our attention to where it rightfully belongs – to the issue of how Inbev will create value by bringing these two firms together. As I have mentioned in previous posts (see Ambush by Inbev and Anheuser’s First Ploy), there are lots of reasons to bring these firms together – there are some real distributional and operational synergies. However, as with any deal, achieving synergies can be difficult (see Why M&A Deals Go Bad), …especially for cross-border mega-deals of this sort (see DaimlerChrysler Post Mortem for a case in point).
Then there’s also the issue of whether or not the deal has become too rich – whether the achieved synergies will more than compensate for the premium.
Although the deal is getting friendlier, it has also gotten pricier…
July 13th, 2008 at 1:57 am
Great blog, subscribed to your rss feed. Thanks.
July 13th, 2008 at 11:04 am
Good for AB at that price. Assuming my understanding that the %EPS share growth from Inbev over the past few years is performance growth, that is to say, organic, and not just added profit form acquisitions, (it’s along time since I have considered such a question and I am not about to go back over the accounts for the past five years, to find out) I’d say that the more companies Inbev can buy the better as they are definitely very shrewd operators. From a patriotic point of view if I was a shareholder of AB, I wouldn’t sell, I would insist on management performing as Inbev, or close t it, and take a risk on that. Some things money can’t buy, and therefore shouldn’t be sold, unless they have to be, and iconic brands are one of them, though for most, to the detriment of our civilisation, money means everything today.