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Sunday, July 13, 2008
InBev Buys Anheuser-Busch for $49.91B
FOXBusiness
The King of Beers has been checkmated by a foreign rival.
The board of Anheuser-Busch (BUD) on Sunday agreed to sell itself to Belgian-beer giant InBev NV for $70 a share, for a total value of $49.91 billion. The combined company will be named Anheuser-Busch InBev and Anheuser will get two seats on the board.
It marks a dramatic shift for the Bud board and its managing Busch family, which, despite some support for the bid from some members, initially fought the idea of a takeover by InBev, which makes Stella Artois, among other popular brands.
But, despite spending weeks fighting the offer - and even initiating legal action to thwart a hostile bid - the Anheuser-Busch board ultimately headed to the bargaining table last week once InBev agreed to raise the price to $70 from $65.
The combined companies are now the world’s largest brewer with more than $35 billion in sales across 300 brands worldwide. SABMiller is currently the largest beer maker in the world.
The deal now is likely to face some political backlash. Local officials in Anheuser-Busch’s home city of St. Louis, Mo., have been fearful that InBev’s deal will cut jobs, and members of Congress have also expressed concern about such a large foreign company owning such a well-known American brand.
But Anheuser-Busch shareholders aren’t expected to have such qualms. Some publicly raised questions about why the company was so against a deal and balked when Anheuser-Busch’s board floated the idea of a takeover of its 50% stake in Mexican brewer Grupo Modelo as a way to fend off the Belgian suitor.
FOX Translator
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Think telemarketer. Except, it's much worse because you can't avoid this call. Instead, when you get one, it's time to pay up, because the bet you placed with borrowed money is eating itself.
Buying stocks on margin is risky because you're essentially "playing" with someone else's money. If the shares you purchased tank, your losses will likely be more than if you had bought the shares with your own cash. This is why the New York Stock Exchange and the Nasdaq impose certain restrictions on the practice.
Initially, you¿re only allowed to borrow half of the money from your broker when buying on margin. You set up a margin account and from then on must keep a maintenance balance of at least 25% of the market value of your stocks.
If the market value of your investment falls below this minimum, you're required to make up the difference by either depositing money into your account or selling some of the stock. If your broker notifies you that you've dipped below this minimum, it's called a margin call.
If you fail to adjust your account accordingly, the broker is authorized to sell shares in your account to make up the difference. The broker can even sell other stock in your margin account to make up for the loss that selling the shares didn't cover.
As an example, say you buy $8,000 in stocks of any given company. You borrow the maximum $4,000 from your broker and pay the rest yourself. Now, if and when the total value of these shares changes, you must make sure you maintain at least $2,000 (25%) in equity. In other words, if the total value were to drop below $6,000, you¿d be in trouble since you only put in $4,000 of your own money to begin with.
