Long reign of the 'King of Beers' is about to end
This article first appeared in the St. Louis Beacon: November 12, 2008 - It's coming down to the finish line. Anheuser-Busch said Wednesday that a majority of its shares were voted in favor of the company's purchase by Belgian brewer InBev, setting the stage for completion by year-end.
Approvals by regulators in the U.S., U.K. and China are the only steps remaining in the deal that started as a hostile takeover in June and became a friendly merger -- thanks to a higher price -- in July.
Wednesday's vote on the $70-a-share offer lacked drama, given the fact that institutional shareholders control most of Anheuser-Busch's stock. They weren't concerned about the emotional impact on St. Louis, which has been home to Anheuser-Busch and its predecessor company since 1852.
Indeed, the special shareholders' meeting, held in a Secaucus, N.J., hotel, was almost perfunctory. The meeting started at noon, and Anheuser-Busch issued a press release 26 minutes later.
Mark Swartzberg, an analyst for Stifel, Nicolaus, said in a research note that two-thirds of the shareholders voted and that 96 percent of this group endorsed the takeover. InBev shareholders approved the deal Sept. 29.
The only excitement in recent weeks had been Anheuser-Busch's stock slipping into the mid- to high $50s, as investors fretted about the deal being affected by U.S. and world economies.
Despite some setbacks, including postponement of a $9.8 billion equity offering to help finance the deal, InBev continues to insist that its financing scheme is solid. The financing includes $45 billion in loans from 19 international banks as well as a temporary loan, which will last six months from the deal's closing, to cover the delay in the equity offering.
Investors who bought Anheuser-Busch recently stand to make a decent and quick profit, as long as the deal is consummated on schedule. In Wednesday afternoon trading, Anheuser-Busch's stock was trading just under $67 a share.
The takeover "was a difficult decision for our board to make," said August A. Busch IV, president and CEO, in a press release that relayed his comments from the meeting.
"In the end, the board determined that the InBev proposal is in the best interest of our shareholders," he said. "The merger also provides a promising future for our beer brands and for all stakeholders."
Busch will join the board of the new Anheuser-Busch InBev, but he won't have daily management responsibilities.
Wednesday's vote nearly closes the book on a period of St. Louis corporate history that is mixed with sadness and irony.
There's sadness because another local company is no longer under local control, yet Anheuser-Busch was not just another local company. Residents call it The Brewery, giving it a degree of familiarity unmatched by any other family-owned businesses in St. Louis that became giant corporations.
There's irony because Anheuser-Busch's fate had long since passed out of family control and into the investments of large institutions. When today's vote was tallied, family members held perhaps 4 percent of the stock.
Local and state politicians complained about a foreign takeover, but they were powerless to stop the trends of global economics. Rallies by residents and talk of a beer boycott made headlines and TV newscasts, but they amounted to little more than catharsis.
Some analysts recently expressed a sense of irony after Anheuser-Busch, whose stock symbol is BUD, produced third-quarter results that beat Wall Street estimates. If the bosses at BUD had been a bit wiser several years ago, analysts say, maybe Anheuser-Busch would still be independent.
Anheuser-Busch grew, thanks to an almost single-minded focus on dominating the U.S. market. It succeeded, even to the point of engaging in revenue-diluting price wars to gain market share. However, it left much of the foreign markets to everyone else.
"The basic problem is that they were not sufficiently aggressive in international growth," William Finnie, a former long-time Anheuser-Busch executive, told the St. Louis Beacon in July.
Anheuser-Busch's ventures in Mexico and China have aided the bottom line substantially as U.S. sales growth has slowed in recent years. However, they weren't enough to overcome the advantage ceded to major international brewers, such as InBev and SABMiller, which have grown by multiple acquisitions.
In the end, Anheuser-Busch and InBev needed each other. InBev has had minor presence in the U.S. and will soon control about half of the U.S. beer sales after the takeover. Anheuser-Busch wanted a greater international presence, but InBev emerged victorious, thanks to its aggressive style and strategy and the U.S. dollar's weakness against the euro.
The new company "will expand Budweiser into new markets around the world, fulfilling the global ambitions my family has long dreamed about for this great American brand," Busch said.
Anheuser-Busch will remain in St. Louis with a slightly different name, Anheuser-Busch InBev, and a definitely different management. The company will be run by InBev CEO Carlos Brito; and the recently reported exodus of several top Anheuser-Busch executives is only the beginning of the transformation.
Even before Anheuser-Busch's board approved the takeover in July, it said it would cut 10 percent to 15 percent of its 8,600 white collar workforce. The question is how many more will depart -- and how quickly -- after the takeover is completed.
The Teamsters just approved a five-year contract, which will take effect March 1 after the current contract expires. Given the perilous state of the economy, this is a generous contract for more than 6,500 workers.
Despite the many changes, there will be plenty of reminders of the old Anheuser-Busch, ranging from Busch Stadium to the Clydesdales to the ubiquitous Super Bowl ads. InBev has indicated that it doesn't want to mess with Anheuser-Busch's marketing skills, which have produced such signature phrases as "The King of Beers," "This Bud's For You," and "Whassup?"
For soon-to-be nostalgic St. Louisans, however, the signature phrase belongs to the late Ral Donner, a rockabilly singer and Elvis Presley sound-alike, who recorded the 1961 hit "You Don't Know What You've Got Until You Lose It."
Robert W. Steyer is a business journalist in New York.