Critics of the Bud Buyout Are Frothing

Opponents want to know: How can America let Anheuser-Busch be sold to Belgian company InBev? But they don't have much of a leg to stand on

Budweiser: The finest beer from Oostende to Genk. If that doesn't sound right to you, you're not alone. InBev's $46 billion offer for Anheuser-Busch (BUD) made some Americans wince. How could the quintessential U.S. beer company be owned by a Belgian outfit?

Since the announcement on June 11, opponents of the proposed buyout have launched Web sites and petitions to scuttle the sale. The site calls the company "an American original," in league with baseball and apple pie. According to the Associated Press, the site was founded by the former chief of staff to Missouri Governor Matt Blunt. Blunt directed the state's Economic Development Dept. to find a way to keep Anheuser-Busch in American hands. And Senator Kit Bond (R-Mo.) urged U.S. Attorney General Michael Mukasey to scrutinize the deal closely for antitrust concerns because it would put "a significant market share of the U.S. in the hands of fewer competitors."

Blunt is obviously concerned about jobs in his home state, as are many of the people opposed to the sale. (Although apparently not many investors: Anheuser-Busch's stock price rose by $3.05, or 5%, to 61.40 on the news. The offer works out to $65 per share.) But the campaign against InBev (INTB.BR) has taken on a distinct nationalistic tone. Anheuser-Busch has successfully marketed Budweiser as the consummate American beer. InBev attempted to address concerns about foreign ownership in its offer letter to Anheuser-Busch, calling the Budweiser brand "iconic" and promising to position it as the company's "global flagship brand." The company has pledged not to close any of Anheuser-Busch's 12 breweries.

Heartland Murmurs

Nonetheless, InBev could be in unfriendly territory. "The heartland of America doesn't take to foreign ownership easily," says Scott Goodson, founder and chief executive of StrawberryFrog, a branding firm in New York that used to handle Heineken's (HEIN.AS) worldwide marketing strategy.

Beer and nationalism have collided before in America. During World War I, the government seized the assets of George Ehret, a German immigrant who was for a time the biggest brewer in the country. Ehret had sailed for Germany for a vacation and got stuck there when the war broke out. While in Germany, he was dogged by innuendo and had to reassure customers of his loyalty when he returned. "My sympathies are entirely with the U.S. in this war," Ehret told The New York Times.

More recently, when Miller Brewing became part of South African Breweries (SAB.L), few Americans raised concerns. Ditto for Wild Turkey bourbon, which was sold in 1980 to Pernod Ricard Group (PERP.PA), a French company. Indeed, if consumers balk at the idea of buying beer owned by a foreign company, they won't have many choices, at least among the major brewers. "If your whole thing is 'Buy American,' where are you going to go?" says Paul Worthington, head of strategy for Wolff Olins, a branding consultancy in London and New York.

Foreign Investment Mushrooming

Most of the remaining American breweries fall into the craft or microbrew categories, outside of a few larger companies like Boston Beer (SAM), which produces Samuel Adams. With the weak dollar, U.S.

companies in a variety of industries are likely to remain a bargain for years to come. Foreign direct investment in the U.S. has boomed in the past decade, from $105 billion in 1997 to $237 billion last year.

"Ninety-eight percent of that is under the radar screen in terms of any political tension," says professor Jeffrey Garten, an expert in international trade and finances at Yale School of Management.

In fact, nationalism usually becomes a factor in acquisitions only when tension already exists for an acquirer. The Mitsubishi Estate's decision to buy Rockefeller Center in 1989 caused concerns because the deal came amid strong U.S. concerns about rising Japanese dominance in key industries such as semiconductors. China's CNOOC (CEO) dropped its bid for Unocal (CVX) in 2005 after opponents raised questions about that country's increasingly competitive stance in defense and energy. Two years ago, congressional opposition kicked up to help stop a company owned by the government of Dubai from taking control of six American ports. Before September 11 and the concerns it generated about port security, it's hard to imagine such a deal getting so much attention.

Uncle Sam's Hands Are Tied

In any case, the U.S. government has a limited role in approving or denying sales of American companies. The Treasury Dept.'s Committee on Foreign Investment can block a sale if it raises security concerns—hardly a factor, one imagines, in beer. Some sales fall under the jurisdiction of American regulatory bodies such as the Federal Communications Commission. But politicians also can get involved by leading public relations campaigns against the foreign companies, putting pressure on company directors and foreign governments.

If the offering price is high enough, shareholders may sweep such objections aside. Busch family members, led by CEO August Busch IV, have indicated their opposition to the sale, but with only 4% of the stock they may not have the clout to block it.

"Anheuser-Busch is an American icon, but if the price is good, it seems to make a lot of strategic sense," Garten said. "The government has no reason to interfere."

Blunt, the Missouri governor, even acknowledged in his statement that "there is no immediate tool available at the state level to stop it." Should the board approve the sale—still a very big if—Budweiser will taste the same, and Americans will probably keep right on drinking it.

Editor's Note: The original version of this story misstated the figures for foreign direct investment in the U.S.

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