The credit crisis has ruined a number of M&A deals, so why not the InBev transaction to buy Anheuser-Busch (NYSE: BUD) and create the world's largest brewer?
The problem may not be so far fetched. Most of the money needed to close the transaction is debt.
According to Reuters, "A banking industry meltdown and corresponding market volatility has already caused the Belgium-based brewer to postpone a $13.4 billion rights issue it planned in connection with the deal."
The InBev management may say that BUD is worth less now as the economy has faltered. The Anheuser-Busch board may not buy that. They like the $70 a share offer they have now. But, do they have any choice to take less? Maybe not.
BUD trades at $58, which means that some risk of problems with InBev are already in the stock. But, before word of the deal leaked, BUD traded below $50. If the board walks now, especially given how far the overall stock market is off, shares could drop well below $40.
Anheuser-Busch is trapped by the 40% drop in most of the equity indexes. Its shareholders are about to be hammered. Look for a deal to get done at $55. BUD don't have any leverage to do better.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
10-24-2008 @ 12:52PM
Kent said...
I thought the buy-out deal at $70 or whatever is a done deal. It's either InBev backs out or goes through with it if they can find the financing now, which was not very clear in their offer. I would doubt Bud will go through with deal for less. They could sue for breach of contract as well. Besides, InBev is paying more than what Bud is actually worth if you look at their balance sheet and income statement though positive and profitable. InBev and Bud deal wasn't popular anyway.
10-24-2008 @ 5:22PM
Andy said...
I hope you are wrong because I just bought $65 Dec call options ( http://www.savingtoinvest.com/2008/10/inbev-and-anheuser-busch-bud-options.html ) to profit from the arbitrage opp on the deal being closed. But this article has got me a little worried.
11-12-2008 @ 9:00PM
Ben Messenger said...
You folks are looking at this as a way to make some fast money. I hope that you remember that when the stock market goes bad Bud stock, ( while not earning a lot) was a safe haven for investors. When your $70.00 dollars a share is spent and gone I want you to remember that so goes and American owned company. Americans complain about jobs going overseas and then sell home companys to foreign buyers. When you can't find a job and you're looking for someomne to blame, take a long look in the mirror. It's you.
11-20-2008 @ 1:37PM
rick hansen said...
all i know is, i paid 134.00 amonth for medical insurance for wife and i since i retired 3 years ago. startin 2009 i will be paying 500 a month. appears this id for all a/b employees, working n retired
that is one hellave increase.
WHY SO MUCH!