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A Choice of Changes

By: Loren Wassell | 06/18/2008

InBev continues to advocate for its offer to buy Anheuser-Busch, the last big beer brewer firmly planted in the United States. In an op-ed in Tuesday's St. Louis Post-Dispatch, InBev CEO Carlos Brito promises to keep the beloved Clydesdales and Grant's Farm, and repeats previous promises to promote Budweiser and keep A-B's 12 U.S. breweries. Brito is also making the rounds on Capitol Hill, where Missouri's U.S. senators are among his vocal opponents.

Meanwhile, St. Louis's new on-line newspaper, the Beacon, published an interview with former A-B marketing exec William Finnie. It highlights the fact that change is coming no matter where things go from here.

• A-B can sell to InBev. InBev will cut costs to help pay the $46 billion price, although InBev argues they've created 12,000 new jobs since their company was formed in 2004.


• A-B can buy the other half of Grupo Modelo, the brewer of
  Corona, which would derail the InBev plan. Modelo's owners are in a good position to drive a hard bargain and A-B will have to cut costs to pay the price.


• Or, A-B will have to come up its own compelling plan that offers shareholders enough value to reject InBev's $65 per share. Whatever else that might involve, it will include cost-cutting.

Cost-cutting is the common theme in all of these scenarios. Markets inevitably recognize weakness and opportunities, like the ones created by several years of flatter earnings and stock price at a company where double-digit earnings growth used to be the predictable norm.

There is speculation that InBev might be persuaded to sweeten its $65 per share offer, though Brito says, "It's a fair price, a full price, that's it." For the kind of institutional investors who own most stocks, a substantial premium in hand may be compelling enough. However, InBev continues to court other stakeholders through Brito's op-ed, legislative visits and a Web site, www.globalbeerleader.com.

To get the deal done, Finnie speculates InBev might be persuaded to move its global headquarters to St. Louis and call the combined company by the proud, historic name of “Anheuser-Busch.”

If St. Louis winds up with the world's largest brewer under a familiar corporate name, it could turn out to be a lot less change – and pain – than some of the other scenarios might bring. The menu of choices is tough, but all involve change. Unfortunately, the options don't include the status quo that Anheuser-Busch successfully defended … perhaps too long.

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