A Beer in the Hand is Worth Two in the Busch

There are few things more American than Budweiser, which is why this news from the Beer World is sure to rumple some star-spangled flags: on Wednesday, Anheuser-Busch officially became the target of a $46.4 billion unsolicited takeover by InBev of Belgium.

This deal, if sanctioned, would combine Anheuser-Busch’s Bud and Bud Light with InBev’s Stella Artois, Bass, and Beck’s, to produce the world’s largest brewer. Of course, Anheuser-Busch has been under family ownership for 148 years, and August Busch IV, the company’s present scion, said that he plans to fight the proposed acquisition, despite resistance from shareholders. The company’s stock has been fairly static in the past few years (really, since its high in 2002), and many stockholders feel that InBev’s offer of $65 a share is well worth any subsequent accusations of anti-patriotism. Obviously a capitalistic nation bows to no beer. Or does it? For some, these colors never run.

Clearly, some lapel pins have been upset as well, as a few brave politicians have decided to stand up for their beer; according to the New York Times, Gov. Matthew Blunt of Missouri declared, “[Wednesday’s] offer to purchase the company is deeply troubling to me.” Mr. Blunt’s concern likely stems not only from self-interest, but also from the fact that it seems unlikely that the Supreme Court will challenge the buyout. Seeing as antitrust infringement would be the only true grounds for breaking up the deal, there is a very good chance it will take place.

But before you take to your pitchforks and torches, there does appear to be recourse for Anheuser-Busch. The brewer has begun initial talks with Mexico’s Grupo Modelo, hoping to acquire the 50% of the company it does not already own. Buying out Modelo would presumably make Anheuser-Busch too unwieldy for InBev, nipping the deal in the bud, so to speak.

As the economy struggles and the dollar weakens, consolidation and foreign acquisition have increased; thus, the Anheuser-Busch deal has become in many ways, symbolic. Anheuser-Busch is now the third American brewer to be wooed by foreign investors, following South African Breweries’ merging with Miller in 2002 and Molson joining with Coors in 2005. If the company is able to resist foreign purchase, it could be an emblematic victory for a vulnerable American economy.

The chief executive of InBev, Carlos Brito, hopes to keep the deal affable and maintains that the acquisition will not alter the company in any significant way, shape or form. Budweiser will not be renamed Le Bud, don’t worry. (Read Brito’s letter to August Busch IV, here.)

Many fall in line with Mr. Brito, believing that this merger would revitalize the stagnating Anheuser-Busch stock, as well as enable the company to gain access to developing (and potentially lucrative) world markets through InBev’s impressive global distribution. As InBev is the product of a 2004 merger between Brazil-based AmBev and Belgium-based InterBrew, it holds a strong presence in the soft drink market in Latin America and Europe and boasts sales in 130 countries worldwide.

Regardless of whether or not their coup is successful, InBev’s bid will set the stage for a heated battle for control of Anheuser-Busch. The company is going into self-preservation mode, with nationalism and patriotism used to spur its defense. The battle will no doubt get ugly, and aluminum egos could be crushed on foreign foreheads. So put on your beer helmet -- this could get interesting.

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3 Comments

  • Jay Tatum

    The King of Beers is Dead! Long live the King. From an historic perspective, family-owned businesses rarely survive past the third or fourth generation of family ownership. Rather than compete with the business models out there that rationalize and recognize the business of beer, I would step back and apply a Family Systems Theory Model here and suggest that the way forward is a step backward! Clearly Mr Busch has done so and his efforts to keep the family business solvent is to embrace the presence of the past - three generations of Busches and the extended families invested in their business. Realistically, this is a huge opportunity to take a stand and dramatically change the course and direction of the family-owned business. If Mr. Busch fails to maintain his family legacy, he fails not just his family, but the families invested in their business as well. Not an easy task for any business person to execute, let alone consider.
    If there was ever a time when an American business needed to stand up to differentiate its self from other businesses selling out, it is now. It may only buy the present generation and the next, but failure to take a stand and allow the business to be swallowed up by a foreign-owned company borders on treason! Long live the King!

  • Kellee K. Sikes

    Speaking as a native St. Louisan and current resident... As a significant employer, tax payer, and philanthropist, the loss or decline of the Anheuser-Busch presence in the St. Louis metro area would be a deep loss across the region.

    “Anheuser-Busch has about 6,000 area employees, a Missouri payroll of $518 million and pays more than $37 million in state and local taxes and fees. Anheuser-Busch's sales rank third-highest among area public companies; its profits are fatter than all but one other area company: Emerson.”

    Change brought about by either ending the buyout or accepting it could be invigorating for all involved. Fair Trade deals focused on a triple bottom line (the impact of monetary profit, social capital, and environmental sustainability) can be brokered every day by captains of industry and share holders alike. Business is only a zero sum game for those who play by a short-sighted, myopic set of rules. The central question remains: Will the powerful few stockholding-hands court greed as their motivational mistress or will they push to broker a marriage built to last another 148 years.

    Kellee K. Sikes,
    "Serving social entrepreneurs and social enterprise by aligning people, process, and publicity for growth and success."
    Principal, Pioneer Technologies Consulting
    www.pioneer-technologies.com