urbanSTL

SoulardX wrote:Don't know the answer to my AB/Modelo question analyst innov8ion?

Haha, nice. The AB/Modelo deal won't go down because:



The proposition is not a strategic acquisition. It's a defensive one and the shareholders know it. It is a good strategic ploy to trigger InBev to raise their offer to the $70/share level, however.



If A-B rejects the InBev deal (and moving to buy out Modelo is a form of rejection), then A-B stock will likely fall immediately down to 50 or below.



There is almost zero chance that shareholders will accept a 40% hit just to maintain the same independence that a 0% profit has given them in the last five years.

I love the smell of GREED in the morning.

Doug wrote:

Moorlander wrote:I love the smell of GREED in the morning.

Smells like Victory!

I think greed smells like Stella Artois. Or maybe it smells like gasoline- after all- we've gotta enjoy that sub-$4 regular unleaded while we can.

Moorlander wrote:I love the smell of GREED in the morning.

It's not greed. It's just business. The job of A-B is to increase shareholder value. A-B sat on their laurels in the last five years and the stock price went nowhere. InBev has a much more competitive culture and the synergies of the deal are great. So not only do A-B shareholders receive the 40% bump, but they're going to be far more competitive in the future especially in China and the rest of the world. This is good for St. Louis.



In any case, Americans are going to have get used to more and more if its companies getting bought out by foreigners. The dollar is weak, you'll have that! What are we going to do, stop being a capitalist society? We can't just remove ourselves from the global economy. If you can't beat em, join em...



There are only two ways the government can block a sale

1. The Treasury Dept.'s Committee on Foreign Investment can block it over security concerns.

Selling A-B to InBev will harm American security? Don't think so!

2. Senator Kit Bond (R-Mo.) urged U.S. Attorney General Michael Mukasey to scrutinize the deal closely for antitrust concerns because it would put "a significant market share of the U.S. in the hands of fewer competitors."

A Justice Department spokeswoman wouldn't comment on the proposed combination. But last week the department approved a joint venture between SABMiller PLC's Miller Brewing Co. and Molson Coors Brewing Co. to distribute their beers in the United States.



Brito pointed out Thursday that InBev has a strong presence in European and Latin American markets where Anheuser-Busch is a niche player. In the United States, where Anheuser-Busch controls nearly half the market, InBev has small presence.



Without substantial overlap between the InBev and Anheuser-Busch, "it's unlikely that the Justice Department will challenge the merger," said James Fishkin, a partner at Dechert LLP and former antitrust attorney at the Federal Trade Commission.



Joseph Krauss, an antitrust lawyer with Hogan & Hartson, said political concerns about job losses or other issues are unlikely to have much impact on the government's review.

innov8ion wrote:This is good for St. Louis.

Spoken like a true transplant. This sucks for our city. This sucks for our nation. That is the truth. You can keep coming back with the same replys buit it's not going to change the facts.



EDIT: BS

^ Fair enough. I do love St. Louis, though. What's going to be so awful about it? Was it really so awful in Milwaukee when SAB bought out Miller?



And yes, I am a transplant. I moved here in 2002. Maybe I just don't feel so passionate about who owns A-B as long as I feel it's in the best interest of shareholders and St. Louisans. I understand that some people are passionate about American-owned A-B and can imagine it's painful for them deal with. I am not in any way marginalizing this.

innov8ion wrote:

Moorlander wrote:I love the smell of GREED in the morning.

It's not greed. It's just business. The job of A-B is to increase shareholder value. A-B sat on their laurels in the last five years and the stock price went nowhere. InBev has a much more competitive culture and the synergies of the deal are great. So not only do A-B shareholders receive the 40% bump, but they're going to be far more competitive in the future especially in China and the rest of the world. This is good for St. Louis.

This is good for A-B stockholders in the near-term - long-term is yet to be seen. This is (potentially, anyway) bad for the philanthropic beneficiaries, the employees and contractors that work for A-B, and for the civic and national pride of its patrons - though that last part may be at least somewhat mitigated by being a "North American" headquarters location.



If AB can fend off the takeover attempt, it will likely force the company to become more aggressive internationally. That would be a good thing.



-RBB

innov8ion wrote:^ Fair enough. I do love St. Louis, though. What's going to be so awful about it? Was it really so awful in Milwaukee when SAB bought out Miller?

yeah, the sky didn't fall in Milwaukee or anything. But Budweiser still being an American brand after the SAB buyout of Miller made it unique and gave it a leg up IMO. If InBev does buy them out that little advantage is gone.

southsidepride wrote:

innov8ion wrote:^ Fair enough. I do love St. Louis, though. What's going to be so awful about it? Was it really so awful in Milwaukee when SAB bought out Miller?

yeah, the sky didn't fall in Milwaukee or anything. But Budweiser still being an American brand after the SAB buyout of Miller made it unique and gave it a leg up IMO. If InBev does buy them out that little advantage is gone.

Since when is being an "American" brand an advantage? The American beer market is not growing. A-B's share in the market is already saturated. There are no other major American beer companies in America. Boston Beer is probably the largest and they don't sell the mass-market stuff. Is everyone going to forego Bud or Miller for Sam Adams so they can feel good inside about buying an "American" beer? I don't think so! Where is Budweiser made? In St. Louis by St. Louisans and 11 other cities nationwide. That seems pretty American to me...



A-B will not lose market share anyway. They'll gain! A-B has had holes in the import/craft beer business. With InBev, they'll have amazing imports to add to the brand mix. A-B also seems to be getting its butt in gear in craft beer with Bud Lime and American Ale. They'll get stronger in America.



But America is not what truly matters. What really matters right now is growth in emerging markets. That's where the money is to be made and that's where the synergy will pay off in spades.



Companies only care about nationalism if it affects the bottom line. It doesn't in this case. It's time Americans learn to accept change rather than fight it. If we don't, it's going to be painful!

JMedwick wrote:

Companies only care about nationalism if it affects the bottom line.

While international growth in both the short term and long term may outweigh it, I think both you and InBev underestimate the impact of nationalism on image of AB's brands.

You're talking about the impact in America? What other practical and economical choices do consumers have if they want to buy "American" beer? How do you think it could play out?

^ I'm pretty sure he/she means that sales will lag if AB is sold.

^ Why do you suggest that A-B sales will lag? What are the reasons?



Don't forget that we will be the North American HQ. We'll still have HQ jobs. I think the comparison you bring up is still similar.



By the way, InBev rose 8.5% after the buyout announcement. BUD rose 6.1% that day. The market loves this combination.

innov8ion, you wrote, "A-B has had holes in the import/craft beer business. With InBev, they'll have amazing imports to add to the brand mix."



Huh? What holes are you talking about? AB already imports all of Inbev's beers. The merger won't add anything to AB's import portfolio.



Lastly, for all your love of and defense of InBev, care to explain why InBev's Q1 08 was so dissappointing? I'm not so sure InBev is good at brewing/selling beer so much as it is good at buying other breweries and cutting costs.

^ That's a good question. How fully is InBev distributed in bars and stores currently throughout America? I bet not to its potential. In any case, A-B only makes a share of the profits on those sales. It's clearly not the same as if they were to own them. So yes, I believe there will be efficiencies and growth in the alignment.



Here's InBev's 1Q 2008 financial statement and analysis: http://www.inbev.com/press_releases/20080508_1_e.pdf. I don't study the financial aspects in depth as I leave that up to others. You can check out their commentary though.

i don't think "potential" has anything to do with it. AB's distribution network is incredible, so it's more a matter of demand for imports, or lack thereof, than a matter of "full" distribution. You really think blue-collar bar goers want to drink Hoegarden (sp?) and Stella. AB could get those beers to them if it wanted.



"I don't study the financial aspects in depth as I leave that up to others."......you best take that "analyst" title back then!

SoulardX wrote:i don't think "potential" has anything to do with it. AB's distribution network is incredible, so it's more a matter of demand for imports, or lack thereof, than a matter of "full" distribution. You really think blue-collar barsgoers want to drink Hoegarden (sp?) and Stella. AB could get those beers to them if it wanted.

I agree, although I don't know enough to say for sure. I also hear that the American craft and import markets are growing. If that's true, couldn't they capitalize?

"I don't study the financial aspects in depth as I leave that up to others."......you best take that "analyst" title back then!

Hah! Fine, take it away. There's different ways to analyze companies. Like looking at their strategy, competitors, technicals (although some don't believe in this), etc. Looking at fundamentals bores me but I realize they can be important so when I was investing more I'd look at tools that would distill the fundamentals down into bite size nuggets. Or maybe I'd ask someone else. It's just good because people have different skills and interests.

innov8ion wrote:^ That's a good question. How fully is InBev distributed in bars and stores currently throughout America? I bet not to its potential. In any case, A-B only makes a share of the profits on those sales. It's clearly not the same as if they were to own them.

There does seem to be potential for growth in InBev's imports. I have always thought it odd that you can find Stella Artois, and increasingly, Hoegaarden, on tap in just about every bar in North America now, but Beck's is still difficult to find, bottle or draught.



On a different topic, weren't there rumors of A-B exploring an acquisition of Heneiken a few years ago or so? From my understanding, A-B has been looking at all of their options for some time now, but thought it best to focus their resources on small acquisitions like Rolling Rock and Goose Island, boosting their stake in Grupo Modelo, and not only boosting their stake, but forming partnerships with, and investing in the modernization of, various Chinese breweries. That was, and is, a good long-term strategy, but not good for short-term profitability, and, obviously, one that left them vulnerable to acquisition.



None of you "analysts" ever addressed the question of what a reduced North American advertising budget, and the loss of marketing control, which I see as inevitable with an InBev acquisition, would do to A-B's domestic market share? As some real analysts have pointed out, much of A-B's success can be traced to their marketing and distributor relationship competencies. What happens when InBev tries to cut costs and micro-manage those decisions and those relationships?

"What happens when InBev tries to cut costs and micro-manage those decisions and those relationships?"



The Bud portfolio loses market share and profits plummet.



I too have no faith in InBev's management's ability to sell/market beer. InBev is a bunch of Brazilian investment bankers conducting business through mergers & aquisitions--nothing more, nothing less.



http://www.stltoday.com/stltoday/busine ... enDocument



AB sells beer and does it incredibly well. InBev does little but cut costs.



Obviously, one is more important to the stock market.

^^ This is a good article talking about failed acquisitions: http://www.stltoday.com/stltoday/busine ... enDocument



Good article on the advertising/marketing issue: http://online.wsj.com/article/SB1213315 ... lenews_wsj. When I think about marketing and Bud's domestic market share, I think about the law of diminishing returns. They spend twice as much as SABMiller... I bet they could spend a lot less on marketing and not lose much domestic market share. It also states that InBev likes to reduce marketing and enter price wars to gain market share, which A-B never was interested in.

^Right, so completely different approaches to the business.



One could argue that A-B dominates the domestic market precisely because they spend twice as much on marketing.



I'm also not sure how effective a price war would be right now, since all brewers are already facing tremendous pressure to increase prices due to the rising costs of ingredients, energy, and transportation. Anyway, how do you think A-B's distributors would feel about InBev's constant price wars? InBev will be faced with either changing their strategy specifically for the A-B acquisition and the North American market, or adopting an "on the bus or under it" approach. I don't know the details of A-B's distributor relationships, but I suspect they would have an out if A-B is acquired. They could jump ship and set up shop with someone else, allowing the competition to either expand their existing networks, or come into the North American market quickly and in a big way. If chaos ensues and A-B stumbles after the acquisition, someone will take the opportunity to grab their market share, a growing market or not. SABMiller, MolsonCoors, Heineken, Boston Beer, etc. are all probably in their war rooms right now, planning for exactly that.



All in all, I see much more potential for value destruction than value creation out of this deal.



On the bright side, for those of us that consume alot of their products, price wars among beer purveyors would certainly be a good thing!

SoulardX wrote:AB sells beer and does it incredibly well. InBev does little but cut costs.



Obviously, one is more important to the stock market.

When A-B went public, it pegged its future on "what was important to the stock market." The Busch family amassed a considerable fortune by selling its ownership of the company in a public offering. Family members certainly could have kept majority or even plurality ownership; they didn't. BUD got access to capital markets it wouldn't otherwise have; it was the company's board's duty to maintain an adequate return on investment (one that lived up to the demands of "the stock market.")



It's pretty difficult to justify any change of rules (or public intervention) at this point. And if we're going to grouse about the weak dollar and the resulting ability of foreign companies to buy American companies, should we set up a whole lot of laws that will prevent American companies from buying foreign companies when the dollar restrengthens?