Anheuser-Busch, InBev and the Credit Crunch

I haven't written yet on the Anheuser-Busch buyout, but with its apparent readiness to fight for its life (or, more accurately, the life of its board), I can't resist any longer. Anheuser has filed a lawsuit against InBev, its unwanted suitor, alleging almost anything and everything to undermine its attempted ousting of its board. What I find most interesting, however, about its arguments against InBev's offer is the use of the credit crunch/crisis in its favour.

Specifically, Anheuser-Bush is arguing that InBev's claimed committment from a group of international banks on the $40 billion needed to finance the deal is questionable at the least. With the current state of the economy and weariness among financial institutions to commit to anything without significant caveats, Anheuser is suggesting that InBev couldn't possibly have a fully-committed issue without a variety of holes through which any number of the so-called committed banks could slip through and away from the deal. All this, of course, to play on the fears of shareholders that walking down the isle with InBev is by no means a worry-free walk towards the marital alter.

It's almost funny how Anheuser has gone so far as to allege links between InBev and Cuba in an attempt to really hit home among Americans resisting any foreign ownership in an icon as notable as the company behind Bud, but it goes to show how completely irrelevant matters can potentially affect the success of a proposed deal. The reality is, of course, if Anheuser appears attractive to InBev, then it's more than likely that it will appear attractive to others as well ...eventually. If Anheuser wants to really protect itself, it's got to look at its business, and not the courts, to strengthen its position and independence.

Battle Between Hexion & Huntsman

I've been trying to get my head around the on-going battle between Hexion Specialty Chemicals, owned by Apollo Global Management, and Huntsman Corporation over the apparent failure of the proposed merger between the two. Not surprisingly, a legal battle has emerged from the remains of the deal that was once considered a match made in heaven.

It comes down to financing - there is none. The banks that were signed-on to provide the money for the deal have backed-out as a result of Hexion's inability to meet the solvency requirements stipulated in the deal. While Huntsman has waived those requirements as part of the merger agreement, the banks still require them and are not willing to put-up the money that's needed for the deal to go through. As a result, Huntsman is now suing Hexion for damages. What makes this interesting, however, is that Hexion is claiming (and I have to admit that I'm tempted to agree) that they have not breached the agreement and are therefore not liable for any damages.

The story isn't that simple, of course. The agreement further stipulates that Hexion has to make a best effort to find alternative financing, but how can it realistically do so if it can't meet solvency requirements as defined here:

... (a) the combined entity’s assets will be less than its liabilities; (b) the combined entity will not have the ability to pay its total debts as they become due; and (c) the combined entity will have an unreasonably small amount of capital with which to conduct its business.

Put yourself in the shoes of the banks considering this deal; would you invest? Yeah, me neither. If that's the case, then, how can Hutsman persist with its claims for damages?