News this week that beer giant Anheuser-Busch (BUD) was suing InBev, claiming that its hostile takeover attempt was illegal, looked surprising desperate to me this early in the game. A report out of the New York Times insists that A-B is now in friendly negotiations with InBev about a merger.
What this tells me is that shareholders are lining up with InBev, most likely including Warren Buffett. If that is the case, A-B probably realizes that it would have little chance of convincing 51% of its shareholders to rebuff InBev. If after putting feelers out there that is the conclusion A-B has reached, the friendly negotiations reported by the Times make sense.
Here’s why. The biggest worry in St. Louis is what type of cost cutting program InBev has in mind for the brewer’s headquarters and other brand building attractions that don’t necessarily contribute to the bottom line. If A-B’s board accepts a seat at the table, they can directly negotiate these important points and get promises, in writing, as to what will happen if the two companies were to merge.
If shareholders are really on board for this deal, and they have the final say in this case since A-B has little in the way of takeover defenses, you may as well go out on your own terms.
Full Disclosure: Long shares of Anheuser-Busch at the time of writing