Friday, June 27, 2008

Busch Entertainment Parks Safe?

Anheuser Busch has said that their method of fighting off a takeover bid by In-Bev will be based on reducing costs at the company, and not selling any smaller aspects of the operation.

This is fantastic news because that means that they do not plan to sell the theme park division! Instead of selling anything, they'll use an early retirement program among other tactics to cut costs to the point where the takeover would not make financial sense.

The fight may not be over, though, as many industry experts expect In-Ben to raise their offer to a level where Busch's board would have a hard time justifying saying no. Then again we'd have parks like Busch Gardens, Sea World, and Sesame Place in danger.

Only time will tell, but at least if Anheuser Busch stays as is, it looks like the parks will remain safe.


careerinfun said...

Be cautious with your optimism. The news was that they don't "plan" to sell the parks. That means that they don't intend to hire an investment bank to find a buyer. However, if someone makes an unsolicited offer, the board has to negotiate with them (especially if it is for cash) or face a shareholder lawsuit for breach of fiduciary duty. Considering how many shares the arbitrageurs have been buying over the past few weeks (the real reason the price has been going up), they will be quick to court of the company fails to respond.

Next, there is a better than 50/50 chance that the company will be sold to InBev, which, in turn, will be forced by its banks to sell non-core assets to pay down debt. The parks will be in that sale.

If Busch should succeed in thwarting a takeover, its stock will fall below pre-offer levels (see RIV or YHOO) which will no doubt trigger shareholder lawsuits against management and the board for not acting in the interests of the shareholders.

In any scenario, the end result isn't pleasant. What we should be hoping for is someone with a chunk of change who likes this industry and wants to maintain the status quo and grow the brand to step up and make an offer.

NewsPlusNotes said...

Wow, sounds like I did jump the gun on that one. Thanks for all the evaluation and info!