USA - Shop clearance at Anheuser-Busch
The announcement of the USD 52
billion sale of Anheuser-Busch to InBev on 14 July 2008 throws
the future of ten Anheuser-Busch amusement and water parks into
the air, including that of several other businesses which InBev
may consider as “non core”.
has said it will help pay for the deal by selling off non-core
assets, but has refused to say which Anheuser-Busch or InBev
businesses fit that definition. Even after Anheuser-Busch agreed
to the sweetened offer of USD 70 a share, the companies are
still keeping shtoom about the fate of Anheuser-Busch’s
associated companies, like the theme parks, the packaging
companies, the hop farms, malt plants, rice mills and the
recycling facilities – the list of which fills a full page in
Anheuser-Busch’s annual reports.
InBev has stressed that none
of 12 breweries which Anheuser-Busch runs in the U.S. will
close. But apart from that everything that’s part of the
Anheuser-Busch empire could be earmarked for sale. InBev is
known for its strict adherence to the principle that you should
not dabble in things you don’t know much about or which others
can do better and cheaper than you.
For proof just remember that
InBev immediately disposed of the glass factory that Beck’s
brewery owned after it had taken over the German brewer.
Wall Street analysts have said
they believe the biggest non-core assets are Anheuser-Busch's
packaging business and its theme parks, which could fetch about
USD 3 billion. Other analysts say that selling the parks and the
packaging company could raise USD 5 billion to USD 6 billion for
InBev. Which would just about cover the USD 7 billion loan that
InBev has to pay back within a year.
Busch Entertainment, the
Anheuser-Busch subsidiary which owns SeaWorld Orlando, Aquatica,
Discovery Cove, Busch Gardens Tampa Bay and six other theme
parks located throughout the U.S., generated USD 1.3 billion in
sales and USD 163 million in profit for Anheuser-Busch in 2007,
it was reported. Earlier this year and thus prior to the sale to
InBev, Busch Entertainment moved its corporate headquarters to
Orlando, Florida, which was widely seen as a necessary first
step towards a spinoff.
In 2007, Busch Entertainment's
properties attracted an estimated 22.3 million visitors
(compared with Disney’s 116 million guests), which made it the
fifth-largest theme park operator in the world according to
However, finding a buyer could
prove difficult. The theme park market is more of a buyer's
market than a seller's market at the moment. It's been a flat
year for parks thanks to the economy and high petrol prices.
The eventual buyer could be a
private equity group. For example, the Blackstone Group
purchased Europe's Merlin Entertainments and Legoland parks in
Anheuser-Busch has used its
entertainment parks as a marketing tool for its beers,
showcasing teams of the famous Clydesdale horses and serving the
company's beers in hospitality rooms – an argument often quoted
in favour of keeping the parks as core assets.
The sale of Anheuser's
packaging business would make more sense, and fetch between USD
3 billion and USD 4 billion, according to analysts’ estimates.
It would allow InBev to focus on brewing, and Anheuser's annual
USD 930 million packaging bill could fall if sourced from a more
efficiently run packaging specialist.
Again, things are not as
straightforward as the armchair strategist might like to
believe. There was a reason why Anheuser-Busch engaged in
small-scale vertical integration. It was partly pet research. In
Anheuser-Busch’s high-spend culture, protégées were often
rewarded with pet-research. But it was not purely grandstanding
that made Anheuser-Busch spend millions on its hop farms, for
example. There was a logic to it: Having their hands in the
various supply industries inevitably meant that they could
improve quality from their vendors which they certainly have had
success with in malt, grain transport delivery, glass bottle
fabrication, and hop growing and hop processing.
subsidiaries produced, it was only a small portion of their
needs. Their glass factory in Houston, Longhorn, supplies an
estimated 75 percent of the glass used at their big Houston
brewery. Then they have their own maltings which make maybe 70
percent of their 2-row malt and 25 percent of 6-row malt.
In the case of
Anheuser-Busch’s hop farms in both Idaho and Germany, people
familiar with the situation say that output was less than 10
percent of Anheuser-Busch’s hop requirements. Yet by putting key
areas under the microscope in their own facilities, they could
better specify quality assurance parametres and acceptable
limits, and help improve operations at their vendors.
Busch agronomists have done
this again and again with maltsters and barley farmers, for
example. Finally, by knowing the relative cost of the
production, they also know very well the extra costs they incur
compared to their vendors. In effect, says one industry insider,
Anheuser-Busch could authoritatively establish what they viewed
as fair pricing. In the world of malt, let’s say, it is like
this: "This is what we'll pay you per bushel to produce using
our protocols and as long as you make our specifications." No
invitation for quotes on pricing. Just a simple dictate that
says “accept the conditions, make the spec, and this is what you
will be paid.”
It’s fair to say that
Anheuser-Busch convinced themselves that such deep investments,
which include great research teams, were ultimately in benefit
of shareholder value and hence “core-businesses”.
Ultimately, the decision of
what’s core and what’s not, will be left to InBev’s controllers
and bankers and what they consider opportune to sell.
december 08 ·
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