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This Bud's Not For You

By

Anheuser-Busch will probably stay in American hands - for now.

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It looks like Anheuser-Busch (BUD) will reject an unsolicited $46.35 billion takeover bid from Belgium's InBev NV.

Some may want to raise a glass to keeping an American icon in Yankee hands - but it sends the wrong message to foreign investors, and may set the stage for a hostile takeover.

Anheuser-Busch will get huffy and say that InBev undervalued the company. But the American beer giant must tell investors how it plans to boost sales in a sector that's been about flat since 2002. Anheuser-Busch may sell some or all of its theme parks and is looking for additional ways to cut costs.

But stockholders may be impatient. If so, they're likely to listen to InBev's pitch if the Belgian company takes its case directly to them - especially because the rejected deal offered about a 30% premium to Anheuser-Busch's stock price before the offer. The stock's 52-week range is $45.55 to $62.72.

For many, beer is just suds and may be a ho-hum, slow-growth industry.

Craft beer such as Boston Beer Company's Sam Adams (SAM) has found a secure niche since it went public in 1996, but investors ask: where's the growth? The stock recently fetched $40.56, off a 52-week high of $55.30. American guzzlers have shown increasing interest in foreign brews, forcing consolidation in the domestic industry.

Colorado's Coors and Canadian brewer Molson merged in 2004 to form Molson Coors Brewing (TAP), swallowing rival Miller in 2007. Still, Anheuser-Busch commands about half the domestic beer market.

Nevertheless, beer sales have been hurt by increased awareness about calories. Long known as "liquid bread," few want to further pump up their burgeoning gut by swilling beer. For many, light beer has all the savor of water from a garden hose - and just doesn't cut it.

Wine suggests a degree of knowledge and sophistication - which comes in handy when chatting up that office cutie. In 2007, wine sales rose 6.2% in dollar value and 3% in volume sales, the wine industry reported. The price jump underscores steady demand.

Well-known names such as Beringer, Ravenswood and R.H. Phillips went public during the wine craze of the 1990s -- no, make that IPO mania fueled by the dot-coms -- and have since been snapped up by larger companies. In 2004, Constellation Brands (STZ) bought Robert Mondavi for about $1.4 billion.

This is just life in a dynamic market where consumers' tastes are always changing and producers sometimes struggle to keep up.

Don't expect a Going-Out-of-Business sign to be hung over Budweiser's Clydesdales anytime soon. But for now, the best way to partake of the beer sector may be to stay on the sidelines and crack open a tall cold one.
No positions in stocks mentioned.
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