Global Investing

For a few dollars more

rtx70dq.jpgThe problem with Anheuser Busch’s defence strategy is that it makes the Budweiser-maker an even more enticing target for InBev, for if the St Louis-based brewer can trim costs so easily how much more can the ruthless cost cutters at InBev take out?

Anheuser would have a stronger case if it had a stronger track record as a cost controller. But while top executives at InBev are said to travel the Atlantic in economy class, Anheuser has a fleet of Falcon executive jets and Bell helicopters.

So if Anheuser can cut $1 billion in costs by 2010 what can InBev do? The Brazilian-led management have been reported to be looking at $1.4 billion, and perhaps even more once the aircraft are put on the block.

Moreover, the St Louis management want to keep their SeaWorld theme parks and still make some of their beer packaging, while InBev sees vertical integration as a thing of past and would put these non-core assets up for sale for $4 billion plus.

InBev can probably afford to increase its cash bid to $70 per Anheuser share from the current $65 before the deal becomes less compelling, but until it makes a higher bid the market will fret it may turn to equity to bridge the $5 gap rather than raise more debt or promise to sell down Anheuser’s 50 percent stake in Mexican brewer Modelo.

Bud brewer in a tight spot from Stella bid

stella.jpgInBev has timed its $46.3 billion bid for Budweiser brewer Anheuser-Busch well. Anheuser’s shares have gone nowhere for five years, Chief Executive August Busch IV is not the leader his father was, while InBev is buoyed by strong revenues from Brazil, where the real is riding high.

That probably explains the wall of silence from the Budweiser brewer’s home town of St Louis. What does it do to fight off the $65 a share bid — sack its chief executive, sell
off its non-core assets or look for a friendly white knight?

The Busch family has had influence over the group well beyond its small 3.5 percent stake. But with hard cash on the table, hedge funds moving in and investment guru Warren Buffett sitting on 5 percent, the family no longer pulls all the strings.