$46 billion deals don’t usually go through without a hitch. However, when you’re a foreign company trying to buy an American icon, those “hitches” are numerous. So Belgian brewer InBev is facing resistence to buying Anheuser-Busch (BUD), and it hasn’t even made a formal bid. WSJ:
A host of factors could derail a bid: the cultural differences between the two brewers; potential unrest from Anheuser employees and distributors; and even protests by politicians over foreign ownership of a U.S. icon during an election year.
“We would like to see it remain an American company,” says Teamsters Vice President Jack Cipriani, who is director of the union’s brewer and soft-drink workers’ conference. “It doesn’t seem that employees fare well when foreign suitors buy American breweries.”
The union, which represents about 7,500 of Anheuser’s 30,000 employees, could turn to its own political ally: Illinois Sen. Barack Obama, the likely Democratic presidential nominee whom the union endorsed earlier this year.
These roadblocks are causing many Wall Street analysts to believe the purchase price for BUD could climb. Analysts think a $70/share deal is becoming more likely, whether the takeover is friendly or hostile.
However, Deutsche Bank believes significant cost-cutting will be needed to make this deal work for InBev, and that becomes more true the higher the purchase price goes. While InBev is more efficient than BUD (operating margins of 27% vs. 17% respectively), BUD is used to paying top dollar for many things, especially marketing. If the deal goes through, BUD will likely see massive layoffs and budgets cuts of more than $1 billion over the next few years.
See Also: Latest BUD Analysis