Yours for Good Fermentables ™: Don't Cry for Me, Saint Louis

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.