BEHIND THE HEADLINES: Behemoths, Lilliputians in beverage industry
MANY WOULD DESCRIBE economic thinker John Maynard Keynes as a guiding light who had a way with words.
Keynes, whose theories when put into practice helped to shape the world as we know it today, once observed that London played such a dominant role in the global financial system in the 19th century that the Bank of England was like the “conductor” of a worldwide symphony orchestra, blending financial notes and policies with impeccable ease and finesse.
Were he alive today and per chance paying any attention to the goings on in the global beverage industry in general and, in particular, the efforts of AmBev to buy most, if not all of Banks Holdings Limited equity at $1 a share, a 60 per cent premium, Keynes would certainly apply his Bank of England analogy to AmBev’s parent Anheuser-Busch InBev. For Anheuser-Busch InBev, the world’s largest brewery with multiple world famous brands in its stable of beer is like a monarch in international beer land and through its various subsidiaries is indirectly involved in the proposed takeover of Barbados’ leading drinks manufacturer, which in terms of volume is less than a Lilliputian in the global industry.
And to support his contention, Keynes would point to Anheuser-Busch InBev’ successful negotiation of an agreement in principle to merge with its nearest rival, SAB Miller for $208 billion. The planned merger, if it passes regulator muster in London, Washington, Beijing, Brussels and other major financial and business centres, a process that may take at least two years to complete, would result in the formation of the world’s largest beer giant, a behemoth, if you will.
What’s likely to occur in Banks Holdings’ corporate merger scenario is that it will go down to the wire about the end of this month or at “such time and date as may be fixed” by AmBev. Acting on or close to the deadline is what happened in the Anheuser-Busch/SAB Miller protracted battle when the former, in the words of one analyst, “had to put up or shut up”. Anheuser-Busch, the makes of such famous brands as Budweiser, Corona, and Stella Artois, had made a number of offers for SAB Miller, whose board of directors had rejected them on the grounds that they were insufficient. But as the deadline beckoned, SAB Miller, which had spurned offers because they “still very substantially undervalue the company” according to published accounts of the wrangling, and Anheuser-Busch reach a gentleman’s agreement to merge.
SAB Miller, famous for such brands as Pilsner, Urquell and Azzurro, stated publicly a few days ago that its board of directors was ready to “unanimously” recommend the offer to its shareholders with the understanding that some key terms and conditions must be met. One of them was that Anheuser-Busch would use its muscle and influence to get over the regulatory hurdles that the huge deal was bound attract.
The negotiations, culminating in a handshake that sealed the deal, involved some of the players and large shareholders that are mentioned in the Banks Holdings offer. AmBev, the large Brazilian company which is “indirectly controlled” by Anheuser-Busch, is one of the them. Another is the Santo Domingo family’s bevco.
When completed, the merger of Anheuser-Busch and SAB Miller would give Anheuser-Busch high visibility and a greater market presence in some of the world’s fastest growing emerging markets in Latin America, Africa and the Caribbean and, stated research firm Euro Monitor International, allow the new corporate giant to garner almost a third of global beer sales, far outstripping its closest rival by more than 200 per cent. That rival is Heineken, the Dutch corporation that’s well known across Europe, Africa, Latin America and the Eastern Caribbean.
The key question is where do we go from here? Both Anheuser-Busch and SAB Miller will continue focussing attention on growth, the same goal Eduardo Lacerda, AmBev’s vice-president for Central America and the Caribbean pinpointed in a recent interview with the BARBADOS BUSINESS AUTHORITY’s Shawn Cumberbatch recently about the proposed acquisition of Banks Holdings in Barbados.
“What we want to do is to come here [Barbados] to grow – and when we are growing we will need additional people,” he said, alluding to more jobs for Barbadians. “So this is our intention, to make sure that the business will grow and therefore we will have successful results.”
And what about the real fear that the acquisition would push out Bajan shareholders, especially the shopkeepers, police, fire officers and others across Barbados who put down their $100 half century or so ago and bought shares in pursuit of a dream of part ownership of what turned out to be a highly successful company?
Mergers and acquisitions are a reality and Bajans wouldn’t be able to block that ship from sailing. Indeed, it has already set sail. Expressions of emotions about the selling of family silver are useful when it comes to reaching a national consensus on the way forward for the private sector but what really counts is ownership, the acquisition of equity in companies as companies strive to get off the ground or expand.
Banks Holdings was a ground breaking enterprise because Peter D’Aguiar, a corporate pioneer and major public figure in Guyana, Richard A. Mapp, a key Bajan small business visionary, and others saw a role for the proverbial “small man and woman” as owners, so much so that they carved out a seat on the corporate board of directors for them. A similar awakening is needed in the 21st century. Crying after the ship has sailed isn’t an effective response. It may grab headlines but what counts is buying into a company.
While the Government in Bridgetown must protect shareholders, Bajans should first acquire something to protect, and that’s equity.