Deal volumes are falling, but bidders’ temperatures are rising. Two of the biggest takeovers in the market have just taken on hostile overtones, after predators and buyers clashed on the question of price. Such war-like behaviour is rarely pretty — but might be the only way to prise open sensible deals.
Take Anheuser-Busch Companies Inc., the US brewer of Budweiser beer. It rejected a $47 billion (Rs2.01 trillion) offer from Belgian rival Inbev NV on Thursday. Rather than sweet-talk Bud’s investors, or juice up its $65 a share offer, Inbev said it had consulted lawyers over the possibility of ejecting Bud’s board of directors.
It’s not the only one to go hostile. BG Group Plc., the UK gas firm, took its $13 billion offer for Origin Energy Ltd of Australia straight to shareholders — without sweetening it first. Electronic Arts Inc., the computer game maker, is locked in a $2 billion wrangle for Take-Two Interactive Software Inc. and France Telecom SA (FT) is pushing TeliaSonera AB to accept its unsolicited $41 billion offer. FT says it won’t go hostile, but the tone is already frosty.
Maybe it’s just tactics on the part of takeover targets. Anheuser-Busch, for one, has suggested it’s open to talks at a higher price. Or maybe the cause is desperate bank advisers, pushing clients to flash point in the fear that if a deal doesn’t happen, their advisory fees, and maybe their jobs, will go up in smoke. But this outbreak of hostility also looks like a rational response to the end of the credit boom. There is now a disconnect between what predators want to pay, and what targets think they’re worth. Anheuser-Busch, for example, claims Inbev pounced when the dollar and the US stock market were weak. A belief that hard times will pass means some targets may be clinging to valuations that now look too optimistic.
Yahoo Inc., the US tech group that rejected a $44 billion offer from Microsoft Corp., now faces a mob of angry shareholders. Anheuser’s shares are still drifting below the value of Inbev’s offer. Even if targets’ boards think otherwise, their shareholders may already be recalibrating their expectations.