Tuesday, 17 June 2008

Battle for Budweiser

Anheuser-Busch goes south of the
border to keep free from InBev

Giant American brewer Anheuser-Busch is seeking a merger with Modelo of Mexico in a frantic attempt to keep free of the clutches of the world's biggest brewer, InBev. InBev, itself a merger of Ambev of Brazil and Interbrew of Belgium, has offered $46 billion in a hostile bid for A-B, owner of the world's biggest beer brand, American Budweiser. InBev's rush to buy A-B means it will take on around $40 billion of debt, with vast loans from banks, including Santander of Spain.
A-B already owns 50% of Modelo, best known for the "lime-in-the-neck" lager Corona. Last year, 42% of Modelo's sales came from exports to the United States and A-B says it will use its muscle to grow that share if the companies merge.
In an extraordinary letter, Carlos Brito of InBev wrote to A-B boss August Busch on 15 june, saying: "We have read the recent reports suggesting you may approached Grupo Modelo regarding a possible transaction between A-B and GM. In light of the reports, we believe it is important for you and your board to u dnerstand that our proposal to combine with A-B by means of acquiring all A-B outstanding shares for $65 per share in cash is made on the basis of A-B's current assets, business and capital structure. Accordingly, we would expect that prior to proceeding with any alternative transaction, especially if your shareholders will not be given the opportunity to vote on it, you would first fully explore our offer and the potential adverse consequences any such transaction could have on the ability of your shareholders to receive our premium offer."
There is no velvet glove in site in this takeover battle: it's all bare knuckleduster. Observers in New York say that even if A-B did fully merge with Modelo, this would not stop InBev coming back with an even bigger offer for the enlarged group. InBev is prepared to deepen its borrowing for achieve this.
*It may be brass knuckledusters at the top of the industry but it's tongue-in-cheek lower down the pecking order. Tony Jennings, who runs Budweiser Budvar UK, the London operation for the Czech brewer, has expressed his full support for Anheuser-Busch in the American company's struggle for independence. Bet that made Augie Busch feel a whole lot better in his office in St Louis!

Monday, 16 June 2008

InBev bids for Busch

Rumours of a planned bid by InBev for Anheuser-Busch have become reality as the world's biggest brewer has tabled a mighty $46 billion/$65 a share hostile takeover of the U.S. producer of the world's biggest brand, Budweiser. Last week, August Busch IV, chief executive of A-B, met two InBev directors in Tampa, Florida, for exploratory talks. The talks were followed by a letter from InBev's chief executive, Carlos Brito, to Busch in which he spoke of the benefits of combining the two beer giants.

"I believe the combination of InBev and A-B would be industry-transforming," Brito added. "It would create an unparalleled opportunity for our two companies."

While August Busch IV is opposed to the takeover, other members of the Busch family are taking a softer line, but the final decision will be taken by independent shareholders. A merger of the two brewers would give them a 25% global market share of the beer business, producing 460 million hectolitres a year.

Wednesday, 4 June 2008

Battle for Bud

Giant merger could
help the other Bud

As the struggle for control of Anheuser-Busch gathers pace -- with both InBev and SABMiller considering bids -- the concentration of power among global brewers could ironically be a lifeline for Budweiser Budvar. The small Czech brewery has been locked in a legal dispute with A-B for more than a century over the Budweiser trade mark. A-B is seen as the only logical future owner of Budvar when the state-owned Czech brewery is privatised, as no other other company would want to fight A-B in the courts.
But if A-B is taken over -- and InBev is reported to be prepared to raise its offer to $50 billion -- the legal battle might change dramatically. Neither InBev or SABMiller, if one becomes owner of American Budweiser, would want to pursue a costly legal battle over the trade mark. And any plans for either group to buy Budvar could be thwarted by Czech anti-trust laws. Both InBev and SABMiller are already major players in the Czech brewing industry: InBev owns Prague Breweries, whose leading brand is Staropramen, while SABMiller controls the leading Czech brands Pilsner Urquell, Gambrinus and Velke Popovice (Kozel). It is highly unlikely that the government would allow either group to extend its domination of the brewing industry, especially as the current fragile right-wing coalition is almost certain to be replaced by a left-of-centre regime after the next election.

Otherwise, it's bad news all round
On every other front, however, this jousting for control of the world's leading beer brands is bad news. The top five global brewers already account for two-thirds of the world beer market and this could rise to 85% if A-B succumbs.
And that would not be the end of the takeover trail. If InBev is successful in its bid for A-B, SABMiller would want to rival its power and scope. Market analysts are already suggesting that SABMiller would make a bid for giant US-Canadian group Molson Coors.