How much beer sells because of feel-good brewery investments like theme parks?
The question jumped to the front burner Monday once Anheuser-Busch Cos. agreed to be sold to Belgian beer giant InBev for $70 a share in cash.
The $52-billion sale creating what's called Anheuser-Busch InBev won't close until year's end. But InBev is scrutinizing the theme parks — including the three Sea Worlds and Busch Gardens in Tampa and Williamsburg, Va., plus the brewer's huge aluminum can recycling operation — as divestitures to help pay the 40 percent premium for America's last domestically owned brewing dynasty.
That's because this deal is all about the beer. Anheuser-Busch InBev was crafted to be market share leader in the world's five top beer-drinking countries.
"There is very little overlap between the two companies," said Carlos Brito, chief executive officer of the company that will emerge with 25 percent of the world beer market. "This makes us the global leader in beer and the third largest consumer products maker in the world" behind Procter & Gamble and Nestle.
InBev will juggle its stable of 200 beer brands including flagships Stella Artois, Bass, Leffe and Beck's with 150 brands and styles including top-selling Bud Light made by Anheuser-Busch.
Combined, the 10 Busch parks and the recycling business are worth about $5-billion, analysts say.
They always have been regarded as part of Busch's marketing to make beer appear more family friendly and the company socially responsible.
August Busch Jr., who kept a home in St. Pete Beach when his St. Louis Cardinals wintered in the bay area, opened Busch Gardens next to his new Tampa brewery in 1959. His successor and recently retired chairman, August Busch III, grandson of the company's co-founder, remained a theme parks fan by investing in them even after he closed the Tampa brewery and sold the Cards a decade ago. But 43-year-old August Busch IV, who will give up his role as chief executive to be one of 13 corporate directors in the new company, rarely visited the parks.
The parks are profitable, doing $162-million in net income in 2007 on revenues of $1.3-billion.
The new owners said Monday that they will not yet reduce a marketing budget that is the nation's biggest buyer of pro sports ad and marketing deals. Brito regards them as "pillars that support" the beer brands in the United States. The Clydesdales and Grant's Farm tourist attraction in St. Louis will stay.
But Brito offered no assurance to the parks, which must prove their worth to avoid being sold or spun off.
Because of the credit crunch and weak economy, analysts see few bidders. Earmarked in the $9.8-billion in new equity and $45-billion in added debt InBev lined up to pay for the acquisition is $7-billion in bridge financing for unidentified divestitures.
"Spinning the parks off on their own IPO with the current management may be the best option," said John Gerner, managing director of Leisure Business Advisors, a Richmond, Va., consultant. "They can license the Busch name if needed."
Cutting costs to bolster profit is key to making the acquisition work. It is the same force driving beer industry consolidation in all mature beer markets like the United States.
That's a specialty of the no-frills InBev culture, in contrast to Busch, which operates like a family fiefdom. Busch has a fleet of corporate jets. InBev executives fly coach unless flights are longer than six hours, when they use business class. Unlike Busch, there are no company car perks or freebies like the monthly free case of beer handed even to theme park full-timers.
A few years ago, InBev was criticized for forcing recalcitrant brewery workers to do pushups and perform silly dance steps, a motivational tactic since banned.
A Brazilian who holds a Stanford MBA, Brito will move ahead on Busch's own $1-billion profit improvement plan that includes higher prices for premium products like Bud Light Lime and early retirement for about 10 percent of the Busch work force. Plus, he has set a goal of $400-million more in reduced costs by 2011.
Mark Albright can be reached at email@example.com or (727) 893-8252.