InBev says A-B takeover on track despite credit market
Will the tightening of the global credit markets throw InBev’s takeover of Anheuser-Busch Cos. off track? Not if you ask the Belgian brewer. But the mood on Wall Street is a little less certain.
In the wake of meltdowns at Bear Stearns and Lehman Bros., there may be traces of skepticism floating around one of the biggest buyouts in history.
Shares of Anheuser-Busch Cos. dropped nearly 3 percent to $66.20 on Monday in the midst of a market-wide slide, and closed at $66.05 Tuesday.
Anheuser-Busch’s stock has never risen above $68.43, even after Anheuser-Busch’s board agreed to the $70 per share. Is that an indication that investors are not quite sure that InBev will be able to secure credit and complete its $70-per-share, $52 billion buyout?
InBev said it is still on track to close the transaction by the end of the year. But Edward Jones analyst Jack Russo lowered his rating on Anheuser-Busch’s stock from ‘hold’ to ’sell’ on Tuesday, citing risks to InBev’s financing package.
"While we still see it as probable that the deal closes as planned at $70 in an all-cash offer, fragile credit markets increase the risk that financing falls through, gets delayed, or gets restructured," he wrote in a research note. He said the risk/reward ratio for owner Anheuser-Busch stock is poor, since there is "substantial downside" if the transaction does not go through.
Morningstar analyst Ann Gilpin likewise urged caution.
"Given the recent deterioration in the credit markets and general uncertainty in financial institutions worldwide, we feel it is prudent to raise our uncertainty rating for Anheuser-Busch," she wrote in a note to clients payday loans. "While we think the deal will likely go through, the state of the credit markets adds some uncertainty around our ($70) fair value estimate, which is based on the transaction price agreed to with InBev."
InBev said it has "fully committed financing" in place, with signed credit facilities from a group of leading financial institutions. It has already completed the primary syndication phase of lining up financing, spokeswoman Marianne Amssoms said in an e-mail.
The aligned banks represent "a very diversified group of strong banks, giving InBev access to all significant capital markets," she said.
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