Word of the Day

Commodity

Even if you don't think you do, you already know plenty about commodities. Want us to prove it? No problem.

What makes oil produced in Saudi Arabia different from oil exported from Nigeria? It's the same thing that makes the corn you ate at last summer¿s barbecue different from the corn used to produce ethanol. Stumped? Well, don't feel bad, it's a trick question. The answer? Absolutely nothing. Corn is corn no matter where it comes from -- just as wheat is wheat and natural gas is -- right! -- natural gas. (Though the quality may differ, the make-up is uniform.)

So, in less elaborate terms, corn and oil (and all other commodities) are homogenous goods that can be processed, resold and more often than not, used as an input to the production of other goods or services. These goods are traded on a commodity exchange, thus setting the price-per-barrel (or other metric unit) used to value them.

Now pay attention, here's a question that indeed does have an answer: What is the difference between a commodity and a stock? While a stock can tank and become worthless, a commodity cannot have its value be wiped to zero. One other difference: Most commodities are traded in futures, meaning traders buy and sell where they think the price of a product will be at a certain point in the future. Stocks trade based on the value of the underlying company at that point in time.

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Thursday, June 26, 2008

Anheuser Turns Down InBev's $46B Offer

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Matt Egan

FOXBusiness

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Iconic American brewer Anheuser-Busch rejected a $46.35 billion offer to be acquired by Belgian-Brazilian brewer InBev, calling the deal “financially inadequate.”

The move was expected but was the company's first response to the buyout offer and could bring the drama between the two brewing giants to another, less-friendly stage: a hostile takeover attempt by InBev.

Anheuser (BUD) turned down the $65-per-share offer late on Thursday, saying shareholders would receive greater value with current plans to grow the company.

“As you say yourself, you dream big. We respect your desires to grow your company. But your growth should not come at the expense of our stockholders,” August A. Busch IV, president and CEO of Anheuser, said in a letter to InBev CEO Carlos Brito.

Earlier on Thursday InBev released a statement saying it filed suit in Delaware Chancery Court, seeking a declaratory ruling on Anheuser shareholders’ ability to remove all 13 members of the company’s board, including the five who were elected in 2006.

InBev could seek to oust all 13 members of Anheuser’s board if it decides to take the deal hostile and make its case directly to Anheuser shareholders.

In the mean time, Anheuser made its pitch to shareholders that they are better off allowing the company to remain independent.

"The InBev proposal fails to be competitive with alternative plans the company has developed in recent months to generate significant top-line and bottom-line growth, which will increase value for the company's shareholders," said Douglas A. Warner III, the board's lead independent director. "The board will continue to consider all opportunities that build shareholder value."

Anheuser argued that the $65-per-share offer undervalues the company's key assets and its prospects, specifically its iconic brands, market leader position, international partnerships and "accelerated earnings growth." The company detailed an enhanced productivity plan that aims to save more than $750 million through 2009 and $1 billion through 2010.

Busch IV also challenged InBev's argument that the potential merger would create ample synergies, which he said are instead "profit enhancements."

"We believe that we can deliver similar enhancements to our shareholders independent of a transaction, and have included these enhancements in our accelerated earnings growth plan," Busch IV wrote in his letter.