With that said I would like to tell you that I will in all likelihood sell my remaining stake in BUD after the opening bell on Thursday. Mostly I am selling to ensure a healthy profit from an investment I made in the first quarter of 2008. Some other issues are to recognized. First off, this event will be one that takes a long time to consummate—if in fact it is approved and completed.
Management is not in favor of a deal, this has been public knowledge for some time now. However, shareholders own BUD and not the family that has run the beer giant for over a 100 years. With that said there could be a plethora of things that can happen in the meantime. I alluded to some last week (read below one article).
There is a good chance that this deal becomes one that is debated, not only for its BOD, management and shareholders, but in circles of St. Louis (BUD’s HQ city) and in cities all around America. With that said what are a few events that could expire.
1) Company accepts $65 a share offer from InBev
2) Anheuser seeks along with its investment bankers an option to buy the remaining 50% of Grupo Modelo ($10-15 billion deal). Result: Potentially InBev backs away, BUD remains independent. Stock trades back to around $50 a share or lower.3) Anheuser BOD refuse the deal. Result: $65 a share bid will be brought to shareholders for a vote. Result: Shareholders Favor a Deal
4) Credit markets tighten up further making loans unavailable for InBev: Result: Offer is rebuked, BUD remains a standalone company.
5) Warren Buffet’s Berkshire Hathaway bids for BUD. Buffet already owns 5% of the shares outstanding (BUD’s largest shareholder). Result: BUD remains American controlled. Buffet owns majority of Anheuser. Will probably keep current management and strategies.
6) Private equity companies bid for BUD. Result: Budweiser goes private and retains the majority of current executives.
For me those are essentially the things that can occur from here on out. Personally, I think option 1 and 5 have the best chance of happening. It is very hard for shareholders not to accept this deal when shares of BUD have gone absolutely nowhere in five years (prior to rumors and eventual $65 bid). Even though BUD is an American icon, people vote with their wallet and not their emotions. That’s the way on Wall Street, and I can’t see it any different.
Click on the link to read the official unsolicited bid from InBev’s CEO.
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