Anheuser-Busch Cos.Inc. BUD
March 25, 2008 - 2:14pm EST by
jsc60
2008 2009
Price: 48.00 EPS
Shares Out. (in M): 0 P/E
Market Cap (in $M): 34,208 P/FCF
Net Debt (in $M): 0 EBIT 0 0
TEV ($): 0 TEV/EBIT

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Description

Anheuser-Busch Companies Inc. is the largest beer producer in North America. It also owns 50% of Modelo (Corona, among others), and 27% of Tsingtao (a Chinese brewer). The industry is typically a low growth category, with recent intrusions from both craft beers, like Sam Adams, and foreign brews, like Heineken. As a result, BUD has experienced modest market share erosion. Additionally, the costs of producing beer have risen: energy, malt, wheat. These problems have been offset with commensurate price increases. The result has been top-line growth at BUD: 1.6% in 2007, 0.4% in 2006, flat in 2005, 1.0% in 2004, 0.8% in 2003. Operating margins have drifted lower, but remain at high levels: 17.2% in 2005, 2006, 2007. After years of transition, BUD is pursuing aggressive cost reduction, and economies of scale in distribution. To simplify the story: the top-line will grow very slowly, margins will be stable to up, and because this is a huge free cash flow business ($2.0b p.a.), EPS will grow at 9%+ (owing to share buybacks). In the meantime, shareholders collect a 3% yield, which grows at 10% p.a.

 

Importantly, I believe that the story is now a very low risk investment, with the principal exposure being a price war in a duopoly (a very rare occurrence).  There are several pleasant surprises which could occur: a diminution in COGS (mostly energy, 5%, malt/ barley prices, 7%, and aluminum/ glass, 7%), a trade-down from craft and foreign premium beers, an improvement in the InBev distribution partnership (Stella Artois, Becks, Bass). Eventually, BUD will merge with InBev (because of the benefits of economy of scale), and you get that option for free (some have thought InBev will pay $70+ per share). Using the 2008 consensus estimate of $3.03, and applying a 14x (historically p/e has been 18x-22x) and dividend income for the next twelve months, one gets to $43.83 – a 4% decline. The dividend discount model yields a $57.28 value, or IRR of 9.4% – achieved with very little expected risk. Bottom line: a very low risk, modest rate of return investment, with a free call on a high probability (long tail) takeover up 50%.

 

 

Date:

2007

LTM

LTM

LTM

2006

LTM

LTM

LTM

2005

Sales

  16,686

  16,416

  16,079

  15,820

  15,717

  15,658

  15,466

  15,228

  15,036

Cost of Goods Sold

  10,836

  10,643

  10,419

  10,222

  10,165

  10,105

   9,974

   9,793

   9,606

SG&A

   2,982

   2,964

   2,924

   2,883

   2,833

   2,866

   2,836

   2,834

   2,838

Operating Income

   2,868

   2,810

   2,736

   2,715

   2,720

   2,687

   2,656

   2,601

   2,592

Interest Expense

      467

      452

      444

      439

      434

      434

      436

      436

      435

Net Non-Oper Loss

     (685)

     (691)

     (649)

     (607)

     (580)

     (548)

     (423)

     (398)

     (398)

Income Tax

      970

      956

      918

      900

      901

      894

      855

      819

      811

Inc(Loss) bef

   2,115

   2,092

   2,023

   1,984

   1,965

   1,907

   1,787

   1,743

   1,744

Extraord L(G)

        -  

        -  

        -  

        -  

        -  

        -  

        -  

        -  

        -  

Minority Interests

        -  

        -  

        -  

        -  

        -  

        -  

        -  

        -  

        -  

Net Income

   2,115

   2,092

   2,023

   1,984

   1,965

   1,907

   1,787

   1,743

   1,744

Depreciation

      996

      997

      993

      989

      989

      987

      988

      988

      979

Other Non-Cash

     (148)

     (227)

     (200)

     (337)

     (433)

     (294)

     (262)

     (284)

       (72)

Work Cap

       (24)

        75

      127

       (57)

      189

      180

      239

      171

        50

CFO

   2,940

   2,936

   2,943

   2,578

   2,709

   2,779

   2,752

   2,619

   2,702

Disposal of Fixed

        -  

        -  

        -  

        -  

        -  

       (48)

        -  

        -  

        -  

CapEx

     (870)

     (891)

     (841)

     (808)

     (813)

     (800)

     (889)

  (1,019)

  (1,137)

FCF

   2,070

   2,046

   2,102

   1,771

   1,897

   1,979

   1,863

   1,600

   1,565

 

 

 

 

 

 

 

 

 

 

Date:

2007

LTM

LTM

LTM

2006

LTM

LTM

LTM

2005

chg sales

1.6%

2.1%

1.6%

0.7%

0.4%

1.2%

1.6%

1.3%

0.0%

Sales

   1.000

   1.000

   1.000

   1.000

   1.000

   1.000

   1.000

   1.000

   1.000

Cost of Goods Sold

   0.649

   0.648

   0.648

   0.646

   0.647

   0.645

   0.645

   0.643

   0.639

SG&A

   0.179

   0.181

   0.182

   0.182

   0.180

   0.183

   0.183

   0.186

   0.189

Operating Income

   0.172

   0.171

   0.170

   0.172

   0.173

   0.172

   0.172

   0.171

   0.172

Interest Expense

   0.028

   0.028

   0.028

   0.028

   0.028

   0.028

   0.028

   0.029

   0.029

Net Non-Oper Loss

  (0.041)

  (0.042)

  (0.040)

  (0.038)

  (0.037)

  (0.035)

  (0.027)

  (0.026)

  (0.026)

Income Tax

   0.058

   0.058

   0.057

   0.057

   0.057

   0.057

   0.055

   0.054

   0.054

Inc(Loss) bef

   0.127

   0.127

   0.126

   0.125

   0.125

   0.122

   0.116

   0.114

   0.116

Extraord L(G)

        -  

        -  

        -  

        -  

        -  

        -  

        -  

        -  

        -  

Minority Interests

        -  

        -  

        -  

        -  

        -  

        -  

        -  

        -  

        -  

Net Income

   0.127

   0.127

   0.126

   0.125

   0.125

   0.122

   0.116

   0.114

   0.116

Depreciation

   0.060

   0.061

   0.062

   0.063

   0.063

   0.063

   0.064

   0.065

   0.065

Other Non-Cash

  (0.009)

  (0.014)

  (0.012)

  (0.021)

  (0.028)

  (0.019)

  (0.017)

  (0.019)

  (0.005)

Work Cap

  (0.001)

   0.005

   0.008

  (0.004)

   0.012

   0.011

   0.015

   0.011

   0.003

CFO

   0.176

   0.179

   0.183

   0.163

   0.172

   0.177

   0.178

   0.172

   0.180

Disposal of Fixed

        -  

        -  

        -  

        -  

        -  

  (0.003)

        -  

        -  

        -  

CapEx

  (0.052)

  (0.054)

  (0.052)

  (0.051)

  (0.052)

  (0.051)

  (0.058)

  (0.067)

  (0.076)

FCF

   0.124

   0.125

   0.131

   0.112

   0.121

   0.126

   0.120

   0.105

   0.104

 EPS

     2.79

        -  

        -  

        -  

     2.53

        -  

        -  

        -  

     2.23

chg in EPS

10.3%

0.0%

0.0%

0.0%

13.5%

0.0%

0.0%

0.0%

-19.5%

 

 

 

 BUD

 JNJ

 KMB

 PG

 TAP

 MSFT

 GE

 PE y2

     13.9

     13.8

     12.7

       17.2

     14.6

     13.3

     12.6

 PE y1

     15.3

     14.7

     13.8

       19.2

     15.1

     14.9

     13.4

 PE y0

     16.7

     15.7

     14.8

       20.2

     17.6

     15.3

     14.9

 p/bv

     10.6

       4.3

       5.1

         4.0

       1.3

       7.6

       2.9

 p/ ebitda

       9.0

     10.4

       7.8

       11.4

       9.4

     13.6

       9.6

 dividend %

       3.0

       2.8

       3.6

         2.1

       1.5

       1.5

       3.7

 ev/ ebitda

     12.1

     10.7

     10.1

       13.4

     10.3

     12.6

     23.2

 p/ fcf

     18.9

     15.8

     21.1

       18.5

     51.4

     17.2

     13.4

 grow est.

       9.3

       8.4

       7.9

       12.4

     12.3

     11.9

     10.8

 hist growth

       1.8

       9.9

       1.7

       18.9

     25.2

     12.4

       9.5

 int coverage

       5.9

     35.7

       9.7

       11.9

       5.1

 nm

     12.8

 td/ ebitda

       2.4

       0.5

       1.5

         1.9

       2.3

        -  

     14.4

 roe

     59.7

     25.6

     32.2

       16.1

       7.7

     39.5

     19.6

 fin leverage

       4.7

       1.8

       3.1

         2.2

       1.9

       1.9

       6.6

 asset turns

       1.0

       0.8

       1.0

         0.6

       0.5

       0.8

       0.2

 npm

     12.7

     17.3

     10.0

       14.0

       8.0

     29.3

     13.1

 opm

     17.2

     24.9

     14.9

       20.3

     12.2

     39.7

     15.1

 eps y1

     3.03

     4.43

     4.57

       3.49

     3.45

     1.87

     2.43

 est qtr

     0.72

     1.19

     1.07

       0.81

     0.28

     0.45

     0.51

 reinvest

 nm

       1.6

 nm

 nm

       1.5

       1.9

       1.7

 p/ sales

       2.1

       3.1

       1.5

         2.7

       1.5

       4.6

       2.0

 etr

     31.4

     20.4

     21.5

       29.7

       0.8

     30.0

     15.0

 pbo

     (184)

  (1,533)

     (753)

    (2,469)

     (212)

 NM

  15,150

 roc

     20.4

     21.9

     18.7

       11.1

       7.3

     39.5

       4.2

 last

   46.10

   65.18

   62.99

     66.54

   52.08

   28.04

   33.82

 

Note: some prices have changed since this chart was prepared.

 

 

Catalyst

Price increases
Trade-down from expensive alcoholic beverages
Consolidation with Modelo and InBev
    sort by    

    Description

    Anheuser-Busch Companies Inc. is the largest beer producer in North America. It also owns 50% of Modelo (Corona, among others), and 27% of Tsingtao (a Chinese brewer). The industry is typically a low growth category, with recent intrusions from both craft beers, like Sam Adams, and foreign brews, like Heineken. As a result, BUD has experienced modest market share erosion. Additionally, the costs of producing beer have risen: energy, malt, wheat. These problems have been offset with commensurate price increases. The result has been top-line growth at BUD: 1.6% in 2007, 0.4% in 2006, flat in 2005, 1.0% in 2004, 0.8% in 2003. Operating margins have drifted lower, but remain at high levels: 17.2% in 2005, 2006, 2007. After years of transition, BUD is pursuing aggressive cost reduction, and economies of scale in distribution. To simplify the story: the top-line will grow very slowly, margins will be stable to up, and because this is a huge free cash flow business ($2.0b p.a.), EPS will grow at 9%+ (owing to share buybacks). In the meantime, shareholders collect a 3% yield, which grows at 10% p.a.

     

    Importantly, I believe that the story is now a very low risk investment, with the principal exposure being a price war in a duopoly (a very rare occurrence).  There are several pleasant surprises which could occur: a diminution in COGS (mostly energy, 5%, malt/ barley prices, 7%, and aluminum/ glass, 7%), a trade-down from craft and foreign premium beers, an improvement in the InBev distribution partnership (Stella Artois, Becks, Bass). Eventually, BUD will merge with InBev (because of the benefits of economy of scale), and you get that option for free (some have thought InBev will pay $70+ per share). Using the 2008 consensus estimate of $3.03, and applying a 14x (historically p/e has been 18x-22x) and dividend income for the next twelve months, one gets to $43.83 – a 4% decline. The dividend discount model yields a $57.28 value, or IRR of 9.4% – achieved with very little expected risk. Bottom line: a very low risk, modest rate of return investment, with a free call on a high probability (long tail) takeover up 50%.

     

     

    Date:

    2007

    LTM

    LTM

    LTM

    2006

    LTM

    LTM

    LTM

    2005

    Sales

      16,686

      16,416

      16,079

      15,820

      15,717

      15,658

      15,466

      15,228

      15,036

    Cost of Goods Sold

      10,836

      10,643

      10,419

      10,222

      10,165

      10,105

       9,974

       9,793

       9,606

    SG&A

       2,982

       2,964

       2,924

       2,883

       2,833

       2,866

       2,836

       2,834

       2,838

    Operating Income

       2,868

       2,810

       2,736

       2,715

       2,720

       2,687

       2,656

       2,601

       2,592

    Interest Expense

          467

          452

          444

          439

          434

          434

          436

          436

          435

    Net Non-Oper Loss

         (685)

         (691)

         (649)

         (607)

         (580)

         (548)

         (423)

         (398)

         (398)

    Income Tax

          970

          956

          918

          900

          901

          894

          855

          819

          811

    Inc(Loss) bef

       2,115

       2,092

       2,023

       1,984

       1,965

       1,907

       1,787

       1,743

       1,744

    Extraord L(G)

            -  

            -  

            -  

            -  

            -  

            -  

            -  

            -  

            -  

    Minority Interests

            -  

            -  

            -  

            -  

            -  

            -  

            -  

            -  

            -  

    Net Income

       2,115

       2,092

       2,023

       1,984

       1,965

       1,907

       1,787

       1,743

       1,744

    Depreciation

          996

          997

          993

          989

          989

          987

          988

          988

          979

    Other Non-Cash

         (148)

         (227)

         (200)

         (337)

         (433)

         (294)

         (262)

         (284)

           (72)

    Work Cap

           (24)

            75

          127

           (57)

          189

          180

          239

          171

            50

    CFO

       2,940

       2,936

       2,943

       2,578

       2,709

       2,779

       2,752

       2,619

       2,702

    Disposal of Fixed

            -  

            -  

            -  

            -  

            -  

           (48)

            -  

            -  

            -  

    CapEx

         (870)

         (891)

         (841)

         (808)

         (813)

         (800)

         (889)

      (1,019)

      (1,137)

    FCF

       2,070

       2,046

       2,102

       1,771

       1,897

       1,979

       1,863

       1,600

       1,565

     

     

     

     

     

     

     

     

     

     

    Date:

    2007

    LTM

    LTM

    LTM

    2006

    LTM

    LTM

    LTM

    2005

    chg sales

    1.6%

    2.1%

    1.6%

    0.7%

    0.4%

    1.2%

    1.6%

    1.3%

    0.0%

    Sales

       1.000

       1.000

       1.000

       1.000

       1.000

       1.000

       1.000

       1.000

       1.000

    Cost of Goods Sold

       0.649

       0.648

       0.648

       0.646

       0.647

       0.645

       0.645

       0.643

       0.639

    SG&A

       0.179

       0.181

       0.182

       0.182

       0.180

       0.183

       0.183

       0.186

       0.189

    Operating Income

       0.172

       0.171

       0.170

       0.172

       0.173

       0.172

       0.172

       0.171

       0.172

    Interest Expense

       0.028

       0.028

       0.028

       0.028

       0.028

       0.028

       0.028

       0.029

       0.029

    Net Non-Oper Loss

      (0.041)

      (0.042)

      (0.040)

      (0.038)

      (0.037)

      (0.035)

      (0.027)

      (0.026)

      (0.026)

    Income Tax

       0.058

       0.058

       0.057

       0.057

       0.057

       0.057

       0.055

       0.054

       0.054

    Inc(Loss) bef

       0.127

       0.127

       0.126

       0.125

       0.125

       0.122

       0.116

       0.114

       0.116

    Extraord L(G)

            -  

            -  

            -  

            -  

            -  

            -  

            -  

            -  

            -  

    Minority Interests

            -  

            -  

            -  

            -  

            -  

            -  

            -  

            -  

            -  

    Net Income

       0.127

       0.127

       0.126

       0.125

       0.125

       0.122

       0.116

       0.114

       0.116

    Depreciation

       0.060

       0.061

       0.062

       0.063

       0.063

       0.063

       0.064

       0.065

       0.065

    Other Non-Cash

      (0.009)

      (0.014)

      (0.012)

      (0.021)

      (0.028)

      (0.019)

      (0.017)

      (0.019)

      (0.005)

    Work Cap

      (0.001)

       0.005

       0.008

      (0.004)

       0.012

       0.011

       0.015

       0.011

       0.003

    CFO

       0.176

       0.179

       0.183

       0.163

       0.172

       0.177

       0.178

       0.172

       0.180

    Disposal of Fixed

            -  

            -  

            -  

            -  

            -  

      (0.003)

            -  

            -  

            -  

    CapEx

      (0.052)

      (0.054)

      (0.052)

      (0.051)

      (0.052)

      (0.051)

      (0.058)

      (0.067)

      (0.076)

    FCF

       0.124

       0.125

       0.131

       0.112

       0.121

       0.126

       0.120

       0.105

       0.104

     EPS

         2.79

            -  

            -  

            -  

         2.53

            -  

            -  

            -  

         2.23

    chg in EPS

    10.3%

    0.0%

    0.0%

    0.0%

    13.5%

    0.0%

    0.0%

    0.0%

    -19.5%

     

     

     

     BUD

     JNJ

     KMB

     PG

     TAP

     MSFT

     GE

     PE y2

         13.9

         13.8

         12.7

           17.2

         14.6

         13.3

         12.6

     PE y1

         15.3

         14.7

         13.8

           19.2

         15.1

         14.9

         13.4

     PE y0

         16.7

         15.7

         14.8

           20.2

         17.6

         15.3

         14.9

     p/bv

         10.6

           4.3

           5.1

             4.0

           1.3

           7.6

           2.9

     p/ ebitda

           9.0

         10.4

           7.8

           11.4

           9.4

         13.6

           9.6

     dividend %

           3.0

           2.8

           3.6

             2.1

           1.5

           1.5

           3.7

     ev/ ebitda

         12.1

         10.7

         10.1

           13.4

         10.3

         12.6

         23.2

     p/ fcf

         18.9

         15.8

         21.1

           18.5

         51.4

         17.2

         13.4

     grow est.

           9.3

           8.4

           7.9

           12.4

         12.3

         11.9

         10.8

     hist growth

           1.8

           9.9

           1.7

           18.9

         25.2

         12.4

           9.5

     int coverage

           5.9

         35.7

           9.7

           11.9

           5.1

     nm

         12.8

     td/ ebitda

           2.4

           0.5

           1.5

             1.9

           2.3

            -  

         14.4

     roe

         59.7

         25.6

         32.2

           16.1

           7.7

         39.5

         19.6

     fin leverage

           4.7

           1.8

           3.1

             2.2

           1.9

           1.9

           6.6

     asset turns

           1.0

           0.8

           1.0

             0.6

           0.5

           0.8

           0.2

     npm

         12.7

         17.3

         10.0

           14.0

           8.0

         29.3

         13.1

     opm

         17.2

         24.9

         14.9

           20.3

         12.2

         39.7

         15.1

     eps y1

         3.03

         4.43

         4.57

           3.49

         3.45

         1.87

         2.43

     est qtr

         0.72

         1.19

         1.07

           0.81

         0.28

         0.45

         0.51

     reinvest

     nm

           1.6

     nm

     nm

           1.5

           1.9

           1.7

     p/ sales

           2.1

           3.1

           1.5

             2.7

           1.5

           4.6

           2.0

     etr

         31.4

         20.4

         21.5

           29.7

           0.8

         30.0

         15.0

     pbo

         (184)

      (1,533)

         (753)

        (2,469)

         (212)

     NM

      15,150

     roc

         20.4

         21.9

         18.7

           11.1

           7.3

         39.5

           4.2

     last

       46.10

       65.18

       62.99

         66.54

       52.08

       28.04

       33.82

     

    Note: some prices have changed since this chart was prepared.

     

     

    Catalyst

    Price increases
    Trade-down from expensive alcoholic beverages
    Consolidation with Modelo and InBev

    Messages


    SubjectQuestions
    Entry03/25/2008 05:39 PM
    Memberdavid101
    JSC,

    As Peggy Lee once sang, is that all there is? You kind of left me hanging so let me ask the following questions:

    1. What specifically do you see driving COGS down? Also, can you give us a breakdown on the COGS components so that we have a sense for how much of COGS is energy, etc?

    2. Why do you think that BUD will merge with InBev and what have been the EV/EBITDA multiples for M&A deals in this space?

    3. Why do you think this is riskless? How has the average beer consumption in North America trended over the past few years? I have seen how soda has lost shelf space in convenience stores over the past ten years to the energy drinks, and I wonder how much beer the under 30 generation will consume.

    Thanks,

    David

    Subjectanswers
    Entry03/26/2008 12:53 PM
    Memberjsc60
    1. What will drive down COGS? Nothing per se...just that BUD has pricing power in a price inelastic segment of beverages. The components re COGS were included in the origional post: they are the numbers which follow the specific component.
    2. BUD is boxed-in; it has nowhere to go in the US (it is about 48%, and it is hard to see big gains ahead); in the EU and in Eastern Europe, the competion is vy well entrenched. The UK is an exception, and it has beeen seriously impacted by the anti-smoking laws.
    3. The EV/ EBITDA multiples have been 11x-12x on takeouts. There are very significant advantages in marketing and distribution for the dominant players -- which is why BUD has been so succesful in the US. They have made some incredible purchases, at incredible prices (notably Modelo) precisely because of this factor (Modelo felt threatened by BUD in Mexico).
    4. Beer consumption grows very slowly in the US, with the biggest forward risk attributable to an aging population. But beer is a percentage of stomach and percentage of alcohol, both of whtich should be favorable. Additionally, beer is significantly cheaper than wine or spirits.
    5. No investment is riskless, but now trading at about 70% of historic valuation, with a consistantly growing 3% dividend, it would fair to say that the risk is muted.
    6. My apology for not bulldozing minutia at you re BUD. Some stories are pretty simple.

    SubjectInternational growth
    Entry03/26/2008 05:41 PM
    Memberoscar1417
    Thanks for, uh, the first half of a good write-up.
    I would like to see some discussion of BUD's growth prospects. Clearly there will be little growth domestically, and the land grab for international brewers is drawing to a close. Aside from their holdings in Corona and Tsingtao, what other prospects does BUD have for growth?
    The dominant market position domestically is enviable and will produce very steady cash flows going forward, but the prospect of 9% growth in this market where yields of 10-20% are readily available doesn't seem too attractive.

    Subjectanswers
    Entry03/27/2008 10:16 AM
    Memberjsc60
    International beer is about 7% of sales, and about 25% of net income; five year growth in sales has been 13%. Canada (where mkt share is 12%) , and the UK (mkt share of 3%) are not going anywhere. China, already the worlds largest market for beer, needs to see a shift to further beer consumption to become a home run. BUD owns 27% of Tsingtao, and 100% of Harbin Breweries (a dominant regional producer). China clearly provides the greatest opportunity, as it is growing in excess of 15%, and the premium segment has yet to emerge (which suggests that margins could improve materially). No doubt, A-B will position Budweiser as a premium brand. India is a wild card; there is at present little beer consumption, but volumes are estimated to grow inline with the economy (10%), but from a low level.
    Yesterday, there were reports from London that BUD would distribute Diageo brands in the US (Guinness, Harp). I am inclined to believe that this is a chess move on industry consolidation, and not a major increment to income.
    Also Modelo is the biggest producer in the third largest beer market, and net has been growing at 11% CAGR.

    Subjecthops
    Entry04/02/2008 12:27 PM
    Memberjsc60
    There was a report on 31mar that the beer industry was "getting slammed" by a hops shortage. BUD grows its entire supply.

    SubjectRE: takeover
    Entry06/13/2008 11:57 AM
    Memberdj927
    What do you think is the chance that mgmt successfully derails the bid. Also the unions are opposed and they have some political clout further complicating the deal. I sold my position the other day at $62, figuring 1)The stock was fairly valued at that price(assuming no deal) 2)There are plenty of undervalued opportunities in this market to redeploy the capital 3) The unions and management might scuttle the deal, I realize this wouldn't be in shareholders interests, but then again I was shocked to see what happened at yahoo. I'd just like to hear your assesment of the risks to holding at this price, while I think the stocks worth $60 even without a deal, It doesn't seem like the mkt agrees and I wouldn't be suprised to see the stock go back to the low 50's if the deal falls through. Thanks

    SubjectRE: takeover
    Entry06/13/2008 11:57 AM
    Memberdj927
    What do you think is the chance that mgmt successfully derails the bid. Also the unions are opposed and they have some political clout further complicating the deal. I sold my position the other day at $62, figuring 1)The stock was fairly valued at that price(assuming no deal) 2)There are plenty of undervalued opportunities in this market to redeploy the capital 3) The unions and management might scuttle the deal, I realize this wouldn't be in shareholders interests, but then again I was shocked to see what happened at yahoo. I'd just like to hear your assesment of the risks to holding at this price, while I think the stocks worth $60 even without a deal, It doesn't seem like the mkt agrees and I wouldn't be suprised to see the stock go back to the low 50's if the deal falls through. Thanks

    SubjectRE: takeover
    Entry06/13/2008 11:57 AM
    Memberdj927
    What do you think is the chance that mgmt successfully derails the bid. Also the unions are opposed and they have some political clout further complicating the deal. I sold my position the other day at $62, figuring 1)The stock was fairly valued at that price(assuming no deal) 2)There are plenty of undervalued opportunities in this market to redeploy the capital 3) The unions and management might scuttle the deal, I realize this wouldn't be in shareholders interests, but then again I was shocked to see what happened at yahoo. I'd just like to hear your assesment of the risks to holding at this price, while I think the stocks worth $60 even without a deal, It doesn't seem like the mkt agrees and I wouldn't be suprised to see the stock go back to the low 50's if the deal falls through. Thanks
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