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CBC: If you ask me – InBev and Anheuser-Busch

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As most of us keeping a close eye on Leuven expected, it was never a matter of if InBev was going to launch a bid for US rival Anheuser-Busch, but when. And that when was late last night (11 June).

InBev has approached Anheuser-Busch shareholders with a US$65 share offer, in a bid worth $46.3bn. As an opening salvo, it's not to be dismissed lightly and represents a 24% premium to Anheuser's share price on 22 May - the day before reports of merger talks surfaced.

It is also highly likely that InBev can sweeten the deal. Analysts seem to believe the price will have to rise to US$70 a share if InBev is to succeed, though one report I have read suggests the Belgian brewer may need to go as far as $75 before it walked away.

As discussed elsewhere on the site today, there are some compelling arguments supporting this potential joining, not least of which are the geographic and portfolio fits.

But this deal and its most recent counterpart - the acquisition of Scottish & Newcastle by Carlsberg and Heineken - make for an interesting comparison. That UK takeover was - a little bit of wounded pride aside - all about money and how the two parties viewed the value of S&N's stake in BBH in particular.

However, for the A-B takeover you can add the explosive ingredients of politics, nationalism and a culture clash to the cocktail. It all means that InBev cannot be guaranteed victory merely by raising the level of its bid.

The headline on today's online edition of the Chicago Tribune sums up the uphill battle InBev faces if it is to win the hearts and minds of those concerned about American interests.

"Massive cuts could be on tap if InBev buys Busch" ran the piece. The report goes on to refer to InBev as a "cost-slicing Belgian firm". The perception is clear: if this deal goes through, American jobs will be lost.

Of course, one of the prime rationales behind most mergers is cost savings, so no one should be surprised if job cuts on some scale are a result of this possible union. But in the current economic climate, against the backdrop of a Presidential election campaign, these things can become hugely significant.

The protection of American economic interests is at the forefront of the battle for the White House. Barrack Obama has already indicated that he is in favour of a more protectionist policy in response to a widespread feeling that free trade is causing job losses in the US. The Republican candidate John McCain is a far greater supporter of free trade, but it is not a popular standpoint in the US at the moment.

Neither should we under-estimate the impact of national pride. When you start to read language that includes terms such as "apple pie" and "red, white and blue" in comments made about a takeover, you know you have stumbled on an emotive issue. The fact is that Budweiser and A-B are important American brands. The thought of them falling under European/Latin American ownership is more than some people can handle.

Websites have begun to spring up, such as www.SaveAB.com, which offers visitors yard signs and bumper stickers to express their distaste for the purchase. And already one political figure has called on the authorities to block the deal.

In a statement, Republican Gov. Matt Blunt said this week that he opposes the deal, and he has directed the Missouri Department of Economic Development to see if there was a way to stop it.

"I am strongly opposed to the sale of A-B, and today's offer to purchase the company is deeply troubling to me," Blunt said in a statement.

InBev, for its part, has foreseen the storm coming. The rhetoric coming from CEO Carlos Brito seems to have been designed to ease American fears. He has promised not to close any US breweries; the name of the combined group will reflect A-B's heritage, he has said, and St Louis will remain the hub of the expanded business's North American operations.

"The whole heritage around the brand, St Louis ties, we intend to keep because that is important for the business and for the community and therefore for us," Brito said today.

But with the twin sentiments of American interests and American pride running as deep as they do, there will be tremendous pressure on the board of directors not to accept the loss of a US icon into foreign hands, let alone accept a deal that threatens US livelihoods.


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