A-B Takeover

This will probably come as no surprise to you, but I'm a bit of a beer snob. And, as such, I think A-B products suck.

I mean, come on -- just look at their lineup:

http://www.anheuser-busch.com/BeerVerified.html

The only products really worth drinking are Red Hook ESB, Hoegaarden, and maybe a couple of other imports. For the most part, though, the rest is pisswater -- ESPECIALLY Bud Light. I also take issue with the entire "Specialty Malt Beverages" section of the aforementioned website.

Either way, economically speaking, the time is right for a takeover, from InBev's point of view. The dollar is weak, and since the Busch family owns only about 4% of A-B stock, they can't really do anything to stop a takeover (even if they wanted to, and I’m not certain they really do.) Neither can Berkshire Hathaway, which owns another 6%, and is the majority shareholder (and is in it only to make a profit, not to save one of the last American mega-corporations) so it would be illogical for BH to stand in the way of a takeover.

A couple in Florida started this website to save Budweiser. What they don't seem to realize, though, is that their crusade is, for the most part, useless. I'm really not trying to be a cynic. I'm just being realistic.

And the reality of the situation is that if you don't own stock in Anheuser-Busch Companies, you don't have a say in the matter. And even if you do, you still may not.

It will come down to the tons of A-B employees and retirees who own lots of stock, and with the way the economy is right now, $65 a share for a stock that is, at best, only worth $49 may look really appealing. Of course, there's also the issue of the capital gains taxes that many of those shareholders will have to consider. If they sold, they'd have to pay a LOT of money to Uncle Sam for the transaction. Plus, I'm guessing a lot of them would be much too proud and loyal to sell. But another factor is this: what percentage of shareholders are A-B loyalists (such as employees, retirees, and local shareholders), and how many are strictly investors? If the board of directors rejected a $65 per share buyout offer, and if the investors outnumber the emotional shareholders, surely the elected board members would lose their jobs, as this is a takeover that, for the most part, makes good business sense… But that doesn’t mean I’d like to see it happen.

Let’s think about what a potential takeover would do to St. Louis. The A-B brands would not go away. They have far too much brand recognition for that to be an option. Your bottle of weak-ass Bud Light won’t change. However, the people making it will. As with any large takeover, the first thing to happen will be a trimming of the corporate fat. And where is much of that corporate fat located? One Busch Place, St. Louis, MO 63118.

You can pretty much say goodbye to a lot of the A-B business units (like Manufacturers Railway Co., Metal Container Corp., A-B Recycling, St. Louis Refrigerated Car Co., Precision Printing and Packaging, Inc., Eagle Packaging, Busch Entertainment Corp., and Busch Properties, Inc.) as these would need to be eliminated entirely (in favor of the same products and services from cheaper contractors) or sold outright to generate some capital for a partial repayment of the $50 billion loan InBev is seeking for the takeover. Those A-B employees who do things like provide security at the brewery can easily be outsourced to Whelan, Securitas, or Wackenhut – and probably for a fraction of the price. Really, the only people whose jobs *might* be safe are those who actually brew the beer.

Basically, it would be an economic disaster for St. Louis. And we’ve had plenty of those in the last 20 years. TWA. May Department Stores Company. Ford. A.G. Edwards. Do I need to go on?

If A-B truly wants to avoid a takeover, they need to look south -- buy up another 50% or so of Modelo in Mexico. That will add an additional $15 billion to the takeover price, and possibly put it out of reach for InBev. Additionally, InBev expressed interest in SAB/Miller last week, which would cost about $23 billion for the merger. That looks like a plan B to me. But that doesn't mean Plan A is off the table.

But we can hope, right?