Bud's Belgian Buyout
Tuesday, July 15, 2008
The King of Beers finally decided to take a queen.
Anheuser-Busch, the St. Louis-based maker of Budweiser, agreed Sunday to accept a $52 billion buyout offer from Belgium's InBev, home to brands such as Stella Artois and Beck's.
InBev, a corporate moniker that has existed for only four years, said it will call the new beer giant Anheuser-Busch InBev, deciding not to discard a well-known brand name associated with true-blue Americana and handsome horses plowing through Christmas-card scenes.
Some Washington beer drinkers reacted negatively to the news.
"It's messed up," St. Louis native James Metz said at the bar in Afterwords Cafe at Kramerbooks in Dupont Circle. The St. Louis community, he said, depends on Anheuser-Busch for jobs and philanthropy.
"If there was a Budweiser here now, I'd drink it," said Metz, hoisting a Stella. Kramerbooks doesn't sell Bud.
Anheuser-Busch, which controls 48 percent of the U.S. market, had resisted the merger mania that has swept through the beer industry in recent years.
On July 1, a joint venture between SABMiller and Molson Coors began under the name MillerCoors, creating the world's largest brewer -- until Sunday. SABMiller was birthed in 2002 by the merger of South African Brewers and Milwaukee's Miller Brewing. Molson Coors Brewing was created by the 2005 merger of Canada's Molson and Colorado's Coors.
InBev itself was brewed by the 2004 merger of the Brazilian beer giant AmBev and the Belgian brewer Interbrew, which traces its roots to 14th-century Flanders.
As in other industries, beermakers have consolidated to cut costs and produce efficiencies, particularly in their distribution networks, which involve the expensive transportation of heavy, fragile goods.
Anheuser-Busch had stood alone since its founding before the Civil War, refusing a tie-up with a rival until InBev came calling with a $70-per-share offer. Anheuser-Busch rejected an initial bid of $65 per share.
The buyout proposal raised eyebrows -- a Euro-brewer taking over one of America's best-known brands? Sen. Claire McCaskill (D-Mo.) was publicly skeptical and met with InBev chief executive Carlos Brito, who tried to win her over.
The final price represented a more than 20 percent premium on shares of the American beer monarch's stock. Anheuser-Busch and InBev have partnered in several countries; for instance, Anheuser imports Stella to the United States.
Even though Anheuser-Busch would remain in St. Louis, McCaskill said yesterday that she was "disappointed" that her hometown brewer had fallen for the Continental charm of the Belgians.
"Anheuser-Busch's Missouri workforce will continue to make the company one of the best in the world, and I am going to do everything I can to make this new arrangement work for Missouri and the millions of Americans who love Budweiser," McCaskill said in a statement.
But it was all next-round's-on-me good cheer between the two companies yesterday.
"This combination will create a stronger, more competitive global company with an unrivaled worldwide brand portfolio and distribution network, with great potential for growth all over the world," Brito said in a statement.
"This agreement provides additional and certain value for Anheuser-Busch shareholders, while enhancing global market access for Budweiser, one of America's true iconic brands," chief executive August Busch IV said in the statement.
Bud Light is the nation's top-selling beer, followed by Bud; the two combine for more than 30 percent of the U.S. market. Five of the top seven beers are mainstream light brews, according to Beer Marketer's Insights.
Although InBev has more than 200 beer brands around the world, it does not have a powerhouse brand like Budweiser. Anheuser-Busch, meanwhile, would go global.
"InBev needs the Anheuser-Busch brand culture," Credit Suisse analysts Carlos Laboy and Anthony J. Bucalo wrote in a research note yesterday. "InBev is weak in marketing processes, particularly in developing consumer insight for optimal occasion-based marketing."
By volume, Anheuser-Busch InBev would be the leading brewer in the powerful Chinese market.
Globally, Anheuser-Busch InBev would produce about 392 million barrels of beer (no, not "on the wall"), more than double its closest rival, SABMiller.
Shares of Anheuser-Busch (which trades under the symbol BUD) closed up 37 cents yesterday, at $66.87. Berkshire Hathaway, chaired by Warren E. Buffett, a Washington Post Co. director, is Anheuser-Busch's second-biggest shareholder.
The deal is to be financed with $45 million in debt. InBev is known for its pennywise ways, and the new company has promised $1.5 billion in annual cost-cutting by 2011. It anticipates that about 40 percent of its revenue will come from the United States.
At the Post Pub downtown yesterday evening, network engineer Monty Ottwell was ending his workday by knocking back a Jack Daniels with a Bud chaser.
"I'm a big fan of Belgian beers. I'm not a fan of Bud selling out," Ottwell said. "It's an American beer. Red, white and blue."