Chances aren´t bad that Anheuser-Busch could be sold
Things are finally moving on. Although the Board of Anheuser-Busch at its Friday 20 June 2008 meeting did not come out in favour of selling the largest brewer in the U.S. to InBev, it did not rule out a sale either. Which can only mean one thing: The Board wants to drive up the price and see how much InBev is willing to fork out for Anheuser-Busch before it commits itself, one way or another.
At present no one knows how InBev´s takeover attempt is going to end. One thing is certain, however: InBev´s spin doctors are doing a great job at keeping the rumour mill going. Contrary to apprearances, nothing has happened since InBev launched its USD 47 billion offer for Anheuser-Busch two weeks ago, ... except that Anheuser-Busch has finally gotten down to studying the offer in earnest and in detail. That is in fact some achievement after 18 months of just talking.
You would not believe it. Last week, InBev´s CEO travelled to Washington on a charm offensive and what happened? He received the proverbial slap in the face by Missouri´s Senator, a woman called Claire McCaskill. Missouri is Anheuser-Busch´s home state, which is what got Ms McCaskill involved in the first place. Playing the patriotic card – it´s election time after all – she urged Anheuser-Busch´s Board to reject InBev´s offer. About the same time, the world´s richest man, Warren Buffett, who also happens to be Anheuser-Busch´s second most important shareholder with about 5 percent of Anheuser-Busch´s shares, let it be known that he urges the Board to consider the USD 65 per share offer favourably. The first news the international media picked up more than willingly, the second one less so. Now which news is more important? The second one. Definitely.
U.S. politicians may pander to Joe Six Pack´s xenophobia, yet in the end it is people like Warren Buffett, for whom money has no passport, who decide if Anheuser-Busch is soon to be run from a small place in Belgium called Leuven.
As things stands, many investors do not seem disinclined to selling their shares to InBev. That´s how the U.S. media have interpreted a letter by Adolphus Busch which was leaked last week and supposedly said that chances for a sale are better than 50:50. What adds an extra bit of spice to his claim is that he happens to be a shareholder and the current CEO´s uncle. Both August Busch IV and his father and predecessor August Busch III are against a sale of Anheuser-Busch. If the Board is really open-minded about a sale this means that August Busch IV is in a minority position.
Another detail that speaks in favour of a sale is that Carlos Fernandez, the CEO of Grupo Modelo resigned from Anheuser-Busch´s Board only hours before the meeting last week. Anheuser-Busch controls 50 percent of Mexico´s major brewer Grupo Modelo (Corona Extra). That´s why Mr Fernandez has sat on Anheuser-Busch´s Board since the mid-1990s. To avoid a conflict of interests, Mr Fernandez decided to step down.
It was reported widely that Grupo Modelo could become a potential spoiler in InBev´s takeover of Anheuser-Busch, provided the Mexicans agree to sell the rest of their shares to the Americans. That would add an extra USD 10 billion to USD 15 billion to Anheuser-Busch´s current price and might make the brewer too big to stomach for InBev. We at Brauwelt do not think such a scenario very likely. After all, for the better part of 20 years the Mexicans have thwarted all of Anheuser-Busch´s atempts to gain control of Grupo Modelo. So why should they help Anheuser-Busch out of a spot of bother now?
With Mr Fernandez gone, it´s now up to the 13 members of Anheuser-Busch´s Board to decide on the brewer´s future. Yet, it´s anybody´s guess when they will finally announce their decision.
So far the international media have only focused on the financial and political implications of a takeover. Apparently the U.S. Presidential election campaign is big on everybody´s mind.
That must be the reason why no one seems willing to pursue InBev´s statement that it plans to take the Budweiser brand truly global should its takeover of Anheuser-Busch prove successful.
InBev´s intentions make sense – if your memory is that of a goldfish. A few years ago the same company announced that it would take Brahma (out of AmBev´s stable of brands) global. After several presumably costly yet unsuccessful campaigns the brand has been relegated to regional status.
Moreover, there is a trifle matter to content with – namely the trademark dispute between Anheuser-Busch and the state-owned Czech brewery Budweiser Buvar over the rights to the Budweiser name.
Lyle Frink reports from Prague that the Czechs have slowly woken up to the fact that InBev´s acquisition of the American Anheuser-Busch could have serious implications for the last of the country´s “family silver”: Budweiser Budvar. The consensus opinion is that an InBev victory would trash the value of Budweiser Budvar, slated for privatisation in the undetermined future.
The major asset of Budweiser Budvar is its claim to the Budweiser name – and its ability to largely shut Anheuser-Busch out of the European market.
It is widely believed that Anheuser-Busch would be a potential buyer of Budweiser Budvar when it comes on the market, thus ending the trademark dispute. Only the Americans might be willing to pay a strategic (read inflated) price for what is basically a medium-sized Czech brewery with some export business.
If InBev wins, there dies Anheuser-Busch´s dream of making its Budweiser a truly global brand. Also the inflated value of the Budvar brewery would come hissing down to the levels expected of a niche brewery.
Of course, InBev could decide to bargain for Budweiser Budvar. But why on earth should they want to do that? To be able to sell the American Budweiser in all markets on earth? Does anybody in their right mind really believe that InBev would spend millions of Euros for what is only a matter of pride? When they already have a huge portfolio of brands? No. And nor do the Czech. For once the Czechs and Anheuser-Busch´s wills seem to coincide. Mark this day.
Ina Verstl
