Archive for June, 2008

What’s brewing? Stella Artois and Budweiser, The InBev offer for Anheuser-Busch

Posted on Friday, 13 June 2008. Filed under: Commentary, Mergers |

Rumoured for months, it finally happens.  InBev makes a $46.3 billion offer for Anheuser-Busch.  The largest deal this year so far if it goes through.

Just last week, reports came of Anheuser-Busch hiring Goldman Sachs and Citigroup on the defense and InBev raising a war chest of cash of $50 billion from JP Morgan, Santander and others (now revealed to include Barclays, BNP Paribas, Deutsche Bank, Fortis, ING and RBS).  By-the-way, just as an aside, did you note in that list of banks providing the funding that it included all of the winning bidders for ABN AMRO (RBS, Santander and Fortis) but also including the ‘losing’ bank, Barclays? 

In addition to Goldman Sachs, Citigroup is advising Anheuser-Busch, whilst Lazard and JP Morgan are advising InBev.

The story has been covered well in all the financial press (although we particularly like this reporting on Reuters).  Key points:  Mostly cash (and thus the share price of InBev has increased over 6% on the day of the offer, bucking the trend of share prices declining for bidders).  Intention is to consumate a friendly deal, and thus was made at an 11% premium to the prior day’s close.  Lack of potential alternative bidders (as SAB Miller, the current largest brewer globally, would have monopoly concerns if it made such a bid), and thus unlikely that InBev will have to sweeten it’s offer too much.  Non-core assets in Anheuser-Busch (such as the entertainment park in Florida, Busch Gardens) that InBev could divest to help pay for the deal and to focus on the core brewing business. 

Some other key points: 

This industry is already in a period of consolidation, where SAB Miller and Molson Coors are now in a joint venture. 

Why a cash offer?  It’s unlikely that the Anheuser-Busch shareholders would want to have InBev shares listed on the Brussels Stock Exchange.  (Similar in many ways to Deutsche Bank’s acquisition of Bankers Trust, at the time the largest purchase at $10.1 billion of a US bank by a foreign bank, but at the time Deutsche didn’t have it’s shares also listed on the NYSE;  I wonder how long it will take for InBev to dual list, assuming it doesn’t mind the Sarbanes-Oxley and other US regulatory requirements.)

Depending on the final price offered, it might be the largest all-cash offer ever (now that the Microsoft-Yahoo deal appears to be dead and buried).

It’s nice to see another deal of this size.  Industry consolidation by strategic buyers is currentl

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What happens when an M&A deal leaks?

Posted on Tuesday, 3 June 2008. Filed under: Commentary, Mergers |

In research sponsored and released today by IntraLinks and conducted at Cass Business School, we have analysed what happens to deals when they leak to the public prematurely.  The answer is unsurprising and not good for those who want the deal to complete in a timely fashion.

Our analysis of over 350,000 deals since 1994 showed the following:

  • Deal Completion:  less than half of all leaked deals complete, compared to 72% of all non-leaked deals.
  • Friendliness:  only 80% of leaked deals are friendly, compared to 97% of all non-leaked deals
  • Delays to Closing:  leaked deals take alomost 70% longer to complete than non-leaked deals (105 days on average vs 62 days).
  • Premiums:  in a counter-intuitive finding, the premium paid in leaked deals is slightly less at 24% vs 28% on average for all deals. 

Certainly, market leaks and insider trading receive considerable press attention but this is the first study to identify the impact of a pre-announcement leak to the press. As noted in the IntraLinks press release on this study, companies would be wise to heed the factors identified in this research so that they are fully aware of the historical impact of such leaks on deal activity.

The press release can also be seen here and as a news story it has been covered in the Financial Times Alphaville (you’ll need to scroll down a ways to find the reference in FT Alphaville), Yahoo Finance,  Financial News, CFO.com and other publications on-line.

As always, I’m interested in your comments on whether you find these findings to be consistent with what you’ve observed, and especially the counter-intuitive finding that leaked deals have lower premiums.

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