business news in context, analysis with attitude

Anheuser-Busch, which just a week ago seemed to be resisting the possibility of a sale of the company to Belgian brewer InBev – with some stories suggesting that there was much familial debate about the mater within the Busch family – has completed a deal that will sell the company that is something of an American icon for $52 billion.

InBev is the maker of Stella Artois, Beck’s and Bass, and the addition of Anheuser-Busch gives it remarkable global marketing power in the beer category, making it number one in the segment ahead of SABMiller.

According to the New York Times, InBev upped its original unsolicited bid for Anheuser-Busch from $65 to $70 per share, and a number of A-B shareholders urged the company’s board of directors to seriously consider InBev’s proposal, which at first sparked more than a month of hostilities between the two companies.

The companies plan to call the new brewer Anheuser-Busch InBev. Anheuser would have two seats on the board.

The Wall Street Journal reports that since InBev and Anheuser don't overlap much across the globe, cost cuts from combining staffing and brewing operations may be difficult to achieve.

MarketWatch writes that the deal “is deeply unpopular in St. Louis, where Anheuser-Busch is one of the region's employers, taxpayers and charitable givers – and where InBev's reputation for ruthless cost-cutting in pursuit of ever-higher margins largest has made locals nervous. Missouri's governor and two U.S. senators -- particularly Democrat Claire McCaskill - have voiced opposition to the deal and vowed to do anything they can to derail it.

“For its part, InBev has pledged that it wouldn't close any of Anheuser-Busch's breweries --- and will even keep the iconic Clydesdales -- but it hasn't ruled out job cuts and said it would be interested in selling noncore assets, apt to include Anheuser-Busch's theme parks. At the same time, (the company) promised St. Louis it would remain the company's North American headquarters and Budweiser would become its flagship global brand.”

The New York Times puts the deal in context, saying that “several American beer giants have already been taken over by larger overseas rivals in the last decade. The Miller Brewing Company was sold to South African Breweries in 1999, and the Adolph Coors Company was bought by Molson of Canada in 2005. (Last year, Molson Coors agreed to merge its United States operations with those of SABMiller.)

“Anheuser’s concession caps a wave of consolidation within the beer industry. InBev and SABMiller, themselves the products of mergers this decade, have led efforts to gain distribution channels across the globe. The rising cost of beer ingredients like grain has also driven companies to seek greater scale and purchasing power.”

KC's View:
Can't help but feel conflicted about this. I’ve always felt that globalization is not only inevitable, but needs to be embraced by US companies as a way of being competitive on the world business stage…and this kind of deal reflects modern realities that are inescapable. But there’s also something sad about this St. Louis icon being sold to a non-US company.

Next thing you know, A&P will be sold to a German company, Giant of Landover will be sold to a Dutch conglomerate, Chrysler will be sold to a German automaker (though I suspect that such a deal won’t work out very well), the Japanese will begin acquiring all sorts of major New York City real estate, and the Chinese will begin loaning the US so much money that we’ll have diminished control over our own economic destiny.