Understanding the InBev bid for Anheuser-Busch

Well, after a long week and many battles with Time Warner, my Internet is back in full force. Sorry for the delay! I’m sure by now that you’ve heard about the proposed buy out of Anheuser-Busch by InBev. In case you don’t know the details, the basic premise is this: Behemoth international brewer InBev has officially bid $65 per share for Anheuser-Busch (whose shares are currently around $50, I believe), valuing the previously fiercely independent American brewer just shy of $50 billion. There are plenty of stories around the Web about the take over but I think one of the best, and most too-the-point I’ve read yet appeared today on The Motley Fool. The article explains why the deal is a no-brainer for A-B shareholders:

From an Anheuser-Busch shareholder’s perspective, it is almost a no-brainer to take the money and run. Anheuser-Busch’s business-as-usual approach is unlikely to yield significant stock appreciation in the near future, and the heights of $65 per share will not be reached by organic means anytime soon. With the costs of raw materials increasing and the company’s flagship brands likely to remain stagnant indefinitely, I see no catalyst for the company’s shares to reach that level on their own.

And why it makes sense for InBev:

So why is InBev interested in a company with stagnant domestic sales? Because this would cement InBev as the dominant international brewer, and there would be precious little that SABMiller or anyone else could do to even approach InBev’s international bulk in terms of sales or volume…

InBev could use its international distribution network to peddle its brands around the world, capitalizing on economies of scale internationally in a way that the world has not yet seen. Slight declines in domestic volume would be negligible in such a context.

But why it might not make sense for Anheuser-Busch as a company:

The company has long glorified itself as standing for everything — and, at times, anything — American. Foreign ownership would almost certainly damage the core image of the company’s brands, which are far and away the most valuable part of the company. This could open the door for a pure-play American company to make the case that it is the true American brewer.

At the end of the day, the article wraps up, the ball really is in Anheuser-Busch’s court. I’ll undoubtedly be keeping a close eye on the buy out as it progresses (as will the rest of the beer blogging world, I’m sure), so keep checking back. And be sure and read the article from The Motley Fool today if you need to finish getting caught up.

source: “The End of the Last Great American Beer?” [fool.com]
[photo by mag3737]