Question:

Why isn't Budwieser selling for $70.00/share?

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If Imbev is paying $70.00/share for Bud, why is the stock only selling for $67.50?

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4 ANSWERS


  1. there is always the possibility that the deal may fall through.  There were a whole slew of buy outs last year that did not complete.


  2. Due diligence performed by the purchasing company may have revealed some performance issues at the company, or some balance sheet accounts that need to be shored up - you never know. It's also possible that the buying company has plans for Budweiser that make it a bad deal for the buying company at a higher price.

    Offer price is based on what the buying company thinks will be profitable for them based on discounted cash flows, created using the company's EBITDA (earnings before income tax, depreciation, and amortization). The purchasing company will also want to make the offer attractive to the sellers, so will offer the highest price that will still be profitable to the buying company.

  3. That offer could be for the company owned shares only. Every company owns some of its own shares.

  4. Because, "When you say.. Budwieser, you said it all"

    -- 80's commercial.

    Now for some comedy:

    Did you know that drinking can make you smarter?

    -- It made Bud - wieser....

    LOL

    Now for the answer:

    Stocks in take over normally trade below the take over price because of the risk that the deal could run into a snag such as not get bank financing, may face anti-trust issues, etc. You can take your free money now (current market price), or roll the dice and hope that there are no issues tat come up from now to deal closing. If no issues, then you will get the deal price when shares are exchanged for cash.

    The people who buy at this point are the arbitrators.

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