Anheuser-Busch (BUD) May Pummel Its Shareholders

Anheuser-Busch (BUD) is anticipating a $46 billion buy-out offer from huge beverage company InBev. The US company’s shares hit $58 on the rumor, a 52-week high. That is up from a low of just below $46. In other word’s, it would be a pretty good deal.

The Busch family and their minions don’t like the thought of being rich but out of work. They think they have found a way to keep BUD from being gobbled up. To make that work, Anheuer-Busch would buy the part of Mexican brewer Grupo Modelo that it does not already own.

The plan just might fly. According to The Times of London "Snapping up the 50% of Modelo that Anheuser does not already own would cost the company between $10 billion and $15 billion and could make Anheuser too expensive for InBev to afford, analysts say."  If the money used for the deal comes in as debt, BUD becomes a highly leveraged company.

Buying Modelo may actually make some sense from an M&A perspective, but by taking BUD off the market as a buy-out candidate. shareholders are likely to get screwed because the Anheuser-Busch stock price will likely fall back to $50 or so, absent a deal.

Tough luck.

Douglas A. McIntyre