Wednesday, October 8, 2008

A-B sets merger approval vote

Anheuser-Busch shareholders will vote on November 12 whether to accept the buy-out offer from InBev. InBev's shareholders have already approved the purchase. And BUD stock is still, inexplicably, trading significantly below the already set buy-out price. Do investors know something? Probably not; it's likely just understandable jitters, given the market's melt-down.

7 comments:

jp said...

Stock is trading under deal price because there is some uncertainty whether or not Inbev tries to renegotiate its original price. Does not matter if In-Bev board has approved sale or not. You can still walk away, although you might have to pay a break-up fee. Financing deal will be a lot tougher given where Inn-bev equity is trading as well as the increased cost of debt to finance the cash portion. That messes up all the economics going forward. Plus do not forget that sales assumptions in the states now need to be taken down a couple of %points. Making the whole deal a lot less attractive. Thus, the greater likelihood that inbev could try to renegotiate the price or even just walk away, thus, trading below the deal price. In times like these would be unheard of to see a deal fall apart.

jp said...

Stock could also be off from fears of AB walking away from the deal. I do not knoow the terms off hand, but I think most of the consdieration was in the form of Inbev shares which are now not quite as attractive.

Lew Bryson said...

Thanks for that, jp. But AB sales are up strongly, and they're well-positioned to keep sales or even grow in a recession, no? And did you mean to say "not unheard of" in that last sentence?

Anonymous said...

Yes that is what I meant: Not unheard of. Uh, no. Consumer Cylcials tend to sell off in a recession if not on top line than on margin. Maybe you maintain top line growth but you tend to get squeezed on competition. In any case that is what is happening to their stock right now.

jp said...

Also please rememberthat equity is forward looking. Revenues are up but nobody cares because global demand is expected to drop. Thus, it is trading off.

Lew Bryson said...

Whew. This is why I have a financial advisor (who's doing pretty well through this, so far), and stick to telling him what beers are good.

Anonymous said...

jp
InBev presently with the purchase of Anheuser-Busch in many ways are making companies with obsolete or disadvantaged business models to envolve,Bud was only the latest and the largest..InBev with the greater IT capabilities will be able to reline the third party distributors not unlike it did in Brazil..This should take out costs from distribution and help the profit split with distributors,Millercoors is doing the same thing on a much smaller level right now....