MEXICO CITY (Reuters) - Mexico's No. 1 brewer, Modelo, run by a family not known for risk taking, is expected to emerge from InBev's $46.3 billion (23.6 billion pound) takeover battle for Anheuser-Busch with only one major change -- a new partner.
Modelo, already 50 percent owned by Anheuser, is expected to block any attempt by the brewer of Budweiser to buy full control as a defensive move. Neither does it want to take on billions of dollars of debt to buy back its stake in the St. Louis-based giant.
Analysts say the most likely outcome is that Modelo, which makes Corona beer, will embrace InBev's bid for Anheuser and hope the Belgian brewer proves to be a more dynamic and innovative partner than the biggest U.S. brewer.
I see Fernandez stepping down differently...to me that means he knows AB is at least going to make an offer for Modelo and there are several issues with him being in positions of authority with both companies...he is likely resigning because he knows he will have to represent Modelos interests fairly and independently to avoid any collusion accusations. How can he fairly weigh a bid for Modelo by AB when he sits as a corporate officer of AB.
So, I would take this to mean that AB will be making an offer for Modelo...as soon as today, which is a good sign, and I truly believe that a sale or nonsale of Modelo to AB will happen pretty quickly...then the ball will be back in InBev's court.
The last point is kind of irrelvant because even if InBev were to elect someone to this position, it wouldnt matter as one director would have no effect. Plus I don't know how their corporate docs treat board vacancies. I would imagine that the chairman appoints an interim director until the next regular shareholders election, so under that scenario it is a great thing for AB because they can appoint whoever they want int he interim.
Ahh, but the board seat DOES matter and it matters A LOT. While I agree with you on the reasons for Fernandez stepping down do not fool yourself, InBev will be trying to get one of their own in that seat.
A-B removed their defenses, one of which is a staggered board. If the board votes No to the merger and the shareholders don't budge, do not think that it is over. InBev can try to get their people elected to the board every year until they have enough to control the vote.
It's now a chess game and InBev is going to try to move their first pawn.
"I view the board meeting as buying time to throw up more defenses -- a scorched earth policy or poison pill." A poison pill unleashes more shares in the event that an unwanted suitor tries to take over a company, driving up the purchase price.
Dave Kolpak of Victory Capital Management in Cleveland also believes the majority of board members may be expressing opposition to the InBev takeover.
"My expectation is the Anheuser-Busch board will resist the offer," Kolpak said. "I think it will be a difficult task because I think it's a pretty generous offer. I think the board today is getting together to think about ways to resist."
This is somewhat reassuring...
In a video interview posted Friday on InBev's Web site, Brito tried to calm fears about what will happen in St. Louis if the takeover is approved.
"We don't have a headquarters in the U.S. So why would we move the headquarters out of St. Louis when we understand that St. Louis is such an integral part of what the brand is all about -- the roots, the Clydesdales, the museum, the Pestalozzi Street brewery, the 1 Busch Place -- all the things are key parts of the brand?" Brito said. "So why change? We don't have a place to go."
The board will not vote "no" for several reasons, one of which being that investors can then file lawsuits alleging they are ignoring their fiduciary duties, among other things. If AB wants to fight this, they will simply say they are still researching and considering the offer while at the mean time employ their dfensive strategy and try to drive the price above what InBev is willing to pay. I would be shocked if the board actually rejects the offer as there is a much better way to fight.
If they reject the offer it will merely start a proxy fight, which nobody wants, so by dragging their feet and taking steps to drive the cost up, they try to get InBev to back away from the deal.
InBev cannot simply elect a director to replace fernandez, which shows your level of knowledge of corporate governance. There is a procedure for replacing vacant director positions that they will follow, or just leave the position vacant.
InBev cannot simply elect a director to replace fernandez, which shows your level of knowledge of corporate governance. There is a procedure for replacing vacant director positions that they will follow, or just leave the position vacant.
I never used the word "simply".
Who do you think elects Board of Directors? Now, who do you think wants this deal done? Also, how do we know that InBev hasn't already been buying up shares of A-B to have a nice sum of voting shares (~4.99% without disclosure) so they can vote on such a thing? There are a lot of "If's" right now and the board departure brings on several of them.
I'm not claiming to know everything but I know that there's more than one way to skin a cat in this scenario and InBev just isn't going to walk away from a $47 Bn deal because it's taking too long but cost will be AB's best defense. They'll go hostile before they walk away from the current offer under the current conditions.
Oh, and I'll forgive you for your attempt at a swipe at me.
TB1000 is right. The stock price has risen 20% since May 20th. Who has been purchasing these shares that are serving to drive up the price? InBev or those allied with them? If greater than 50% of the shareholders support InBev, Anheuser-Busch would eventually be sold it seems.
Where is Anheuser-Busch's corporate governance described? The Corporate Library, and independent firm, gave BUD an F in Corporate Governance. Ref: http://snipurl.com/2lxyz
The strategy mohipsi brings up looks to make sense. But how long until a proxy fight weakens them?
In order to be on the board, a director must hold common stock worth 3 times the directors annual retainer, but has 5 years to do so after their election.
Also, you will note that although AB got rid of their shareholders rights plan or "poison pill" the board can add it back in at anytime and it doesnt have to be put to the shareholders for a vote for 12 months.
The board controls its own size, thus I would presume can just eliminate that board position...
The problem with just adding back the poison pill is that they can only do that without shareholder's vote when they feel it is in the best interest of the shareholders. How they define "best interest", should they place a poison pill back in, can cause serious trouble.
Investors can call a special stockholders' meeting if they have the support of shareholders holding 25 percent of the stock so that may kill an added poison pill.
Adolphus seems like the "meddling" uncle who has been leaking to the press for weeks. He's gotten quite a bit a traction in the media being the only Busch who is publically speaking. He's been for the buyout from the get go. His letter is predictable and probably unimpactful.
that was a funny little line a the end. "budweiser will ONCE AGAIN be the king of beers"... What? Bud is the best selling beer in the world right now. who else is the "king" then? This guy is a joke. sounds like one of the quacky Busch's...
Couldn't a solid argument to made that Anheuser Busch is an internationally iconic brand and has developed into a genericized trademark?
This is the value being undervalued. "InBev" is a wholly meaningless name in the consumer's mind. Anheuser Busch is as much a brand as Budweiser or Bud Light. Why would any investor overlook this value and allow it to pass?
Couldn't a solid argument be made that Anheuser Busch is an internationally iconic brand and has developed attributes of a genericized trademark?
This is the value being undervalued. "InBev" is a wholly meaningless name in the consumer's mind. Anheuser Busch is as much a brand as Budweiser or Bud Light. Why would any investor overlook this value and allow it to pass?
AB can also make the argument to shareholders that the brand was undervalued and that even without the InBev merger, the per share price is likely to remain higher than where it was previously trading because the unsolicited offer has made people realize its actual value.
The bottom line though is that AB will ahve to incur debt and get aggressive in new markets to sustain long term growth. A Modelo deal is a good dela in that it has always been in their long term plans. They will ahve to be careful with any other aquisitions that they fit a model of growth.
Another rumor is that the Guiness brand may be up for sale, this could be interesting for AB because they really have nothing that competes with guinness (bare knucke stout?) plus Guiness is very nostalgiag like AB with the museum, etc and I would imagine AB would maintain all of that and then would be able to use their distribution network to grow guiness.
The point here is that even without modelo, they could still make a move to do something.
Also, SABMiller has said they would not try to buy AB because it would devalue the AB brand image and their CEO stated that he doesnt see how InBev could sustain AB's brand image...these are words that could be used in an appeal to shareholders as well.
I wonder how much InBev has considered the extent of potential backlash from AB's distributors, suppliers, and most importantly, customers? I've heard a lot of people say they may stop drinking AB products if they sell out. Of course it is talk but with all of the beer choices these days it may be rather easy to do.
I think Schlafly should step in as a White Knight and offer to buy AB.
You have to throw away aruguement that this deal will "devalue" AB... Once the deal is done, a "former AB shareholder" should not care about InBev and AB because they are devested from those companies.
That is because Inbev is buying the shares with CASH! So you either accept the deal and take the cash and run, or dont take it, trying to recoup your investment overtime via dividens or stock price appreciation.
SABMiller will eventually be broken up. They don't have a cohesive strategy.
In the case of Budweiser beer, you're buying the brand. Think of InBev more as a holding company. Does the name of a holding company matter that much? Not really, it's the branding of the individual beers that matters. With that being said, It's likely they'll incorporate the A-B brand somehow into the combined name of the company.
We shall see how this plays out. I bet it'll make for an interesting MBA case study in the future. Perhaps I will have the opportunity to study aspects of it.
