The main argument from the InBev announcement this morning to BUD shareholders:
Do you, the shareholders, reasonably believe that the current management structure at BUD can produce increased earnings in the very near future able to reflectively show an increase of the BUD common stock to $65 without the threat of buyout?
If not all BUD shareholders, that’s what the Street is thinking. I’d also consider the roles of the buy-and-hold investors with annuity-level dividend strength and the current models for expansions after the capital investments necessary to open BUD manufacturing and logistics requirements in China, then India.
Also, I missed this part, but apparently there was a strong statement of solidarity by InBev for StL. Good to hear.
innov8ion wrote:Maybe A-B wants $71.75 but the answer is probably in the middle -- around $68.
I don’t know about them, but I’d seek $71.75. It takes into consideration the recent increases in price and levies the premium worth of the brand and the business. That sounds to me like a fair relative valuation of the opportunity costs of letting InBev take over the global business development process after laying the ground with branding and strategic partnerships. And, it shows they’re serious.
innov8ion wrote:
I and other analysts agree you may have a point. But it's very likely too little too late now.
I hadn’t thought of you as an analyst beforehand. One of the big firms or an independent? If at a big firm, what does your Beverage Sector analyst think of all this?
JMedwick wrote:Don't think InBev isn't making this deal now as a preventative measure against AB's strong position in India and China.
This of course, has to be part of the pitch AB would make if it hopes to fend off the takeover- that InBev can have all the beer drinkers it wants in Brazil and Belgium, but if AB is the leader in China and India, they will grow faster. The question is, does anyone believe it to be true?
It’s absolutely true.
The Chinese beer drinker market is growing very rapidly as BUD is offering cans of beer that don’t taste like oatmeal in tepid rain water, which the majority of small Chinese domestics tasted like. I actually had the chance to meet with some of the BUD heads in Beijing two years ago, and I was very impressed with their operations, including national strategies, regional strategies, logistics, M&A, and their handling of intellectual property violations, the most endemic problem of Western companies doing business in China.
India will be a tougher nut to crack than China, mostly due to consumer drinking patterns, but they have the advantage of proximities and early entrance, as well as brand awareness and marketing budgets. Caveat: I’m less aware of BUD’s strategies with India than I am with China.
Focus:
Over 2 billion new potential consumers are in India and China, virgin markets.
The West, including the United States, Belgium, and Brazil, are mature, saturated markets.
First Mover Advantage is absolutely key in establishing market dominance.
For these reasons, as well as those above, I'd seek higher than $65 today.
