Anheuser-Busch Short Selling Cash? (BUD)

Anheuser-Busch Companies Inc. (NYSE: BUD) reported earnings today, and no one is paying attention because of the InBev merger at $70.00 making this earnings report essentially a non-event.  But there are two issues coming down the pipe, one which will matter as a consumer and another which will matter for a very short period of time for shareholders.

On the investor front, the soon to be acquired beer giant has increasedthe regular quarterly dividend rate on the common stock by about 12% to$0.37 from $0.33, marking its 32nd consecutive year of dividendincreases.  This dividend is payable September 9, 2008 to shareholdersof record August 11, 2008.  The question to ask here is "Why bother?"since it is about to be acquired.  With such a temporary dividend hike,it’s almost the same as short selling cash.  We have approximately 713million shares listed as outstanding (and roughly 704 million in thefloat).  If we use the outstanding shares fully diluted and assume thatthe merger won;t close until early 2009 then shareholders who stickwith it until the $70.00 buyout would possibly get this dividendtwice.  That would increase the outflows from the company toshareholders by about $56 million extra.  We view this as short sellingcash, but maybe the company thinks it’s just a cheap insurance policy.

But as fas as the issue where the consumer is concerned, get ready.The beer giant is going to hike prices starting in September for whatit calls 85% of its domestic volume and is looking for a revenue perbarrel increase of 4% including a favorable brand mix.  In short, thatit "beerflation."

Maybe the company is signaling strong trends remaining in case thatInBev merger falls through or gets blocked by one of the regulatoryagencies.  With a $48 Billion market cap today and a tightening globallending environment combined with a growing protectionism neither caseis an impossibility.

The drinking will continue until morale improves.

Jon C. Ogg
July 23, 2008