Anheuser-Busch (BUD, $57.78, up $0.32) hit another 52-week high Monday after it was reported that Belgium’s InBev is close to securing $50 billion in its efforts to launch a takeover bid for the company. The stock hit a high of $59 even. Volume was incredible with 13 million shares trading hands.
Inbev has talked with JP Morgan (JPM, $42.15, down $0.85), Merrill Lynch (MER, $42.62, down $1.30), and a couple of other investment banks about a financing package. If InBev can get the financing the next step could would be a formal letter to Anheuser-Busch’s board. And that my friends could come by the end of the week.
Meanwhile, BUD has hired its own bankers to help analyze the company’s “options”. The company is putting together a defense team that could stop the Patriots from scoring. Well maybe not, but having Goldman Sachs (GS, $172.34, down $4.07) and Citigroup (C, $21.46, down $0.43) to fend off takeover interest is not a bad combo to have in your backfield.
Of course, the bigger story here is that the Busch family isn’t interested in selling. And who could blame them? Besides having THE most famous brand name in the world, the company is making strides internationally. The growth is being driven by its 50% ownership in Grupo Modelo, which holds nearly 60% of Mexico’s beer market, and also exports the popular Corona brand to the U.S.
Anheuser-Busch also has its footprints in China. BUD owns nearly a 30% stake in Tsingtao, which is one of the leading brewers in China, and also happens to be one of the largest and fastest growing markets on the planet. But some on Wall Street question the company’s investments abroad saying it may be “too little, too late” as they sat and watched other brewers form partnerships. That could be true but Corona and Tsingtao are the “King of Beers”, respectively, in those countries.
I mentioned the BUD-InBev story a couple of Friday’s ago and profiled the June 55 calls (BUDFK, $3.80, up $0.40) at $3.10. They traded as high as $4.40 Monday. The June 60 calls (BUDFL, $1.20, unchanged) traded up to $1.70 and closed at the same price they were two weeks ago. Over 22,000 contracts traded on the June 60’s. So the opportunity to make money with the June calls was/ is there.
There was also action in the July 60 calls (BUDGL, $2.05, up $0.10) which hit a high of $2.45. The July 65 calls (BUDGM, $0.45, down $0.05) got up to $0.75 but faded as BUD retreated from its highs of the day. The 60 and 65 calls are still out-of-the-money and the 65’s will be more volatile because of the higher strike price.
Look, you don’t take these kind of steps (financing $50 billion) without pulling the trigger. InBev is the world’s #2 brewer and is gunning for SABMiller. Anheuser-Busch is third. The sad thing is…as much as BUD doesn’t want to sell, there are some who say there is no way the Busch family can stop it, and, if the board does, InBev could take it to the shareholders. Ala a sequel to Microsoft (MSFT, $27.80, down $0.52) and Yahoo (YHOO, $26.40, down $0.36).
Yes, it would be sad to see a bid come as Anheuser-Busch is iconic and is the last of the great American breweries but there’s nothing you and I can do to stop it. It’s that simple. Hopefully if you are long the stock or options the buyout news comes soon and an offer comes in 15%-20% higher than where BUD is currently trading at.
Rick Rouse
Rick@OptionsMentoring.com
