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Can InBev sell Anheuser-Busch theme parks?

Tuesday, July 15, 2008

ST. LOUIS —  When Anheuser-Busch executives announced a cost-cutting plan in June, they surprised analysts by not proposing to sell the company's amusement parks and entertainment holdings. Belgian brewer InBev is likely to be less sentimental.

Having agreed to buy the largest U.S. brewer for $52 billion, the "non-core assets" like Busch Gardens and SeaWorld seem likely to go on the market. InBev SA is known for acquiring new companies and aggressively slashing costs to pump up its bottom line. Chief Executive Carlos Brito _ who spent Tuesday touring Anheuser-Busch Cos. Inc. headquarters in St. Louis and addressing employees _ said he is already looking for assets to unload, with the goal of saving $1.5 billion annually by 2011.

But even if InBev decides to spin off the theme park divisions, it's not clear who would buy them. A troubled financial sector could make it hard to line up billions of dollars to finance the deal, and many big U.S. theme park operators are cutting costs amid rising fuel prices and a sluggish economy.

"I think if there were to be a buyer for the parks, it might come from overseas. There are some deep-pocketed players overseas," said Paul Ruben, North American editor for the England-based Park World Trade Magazine. He estimated Anheuser-Busch's entertainment division would fetch between $4 billion and $5 billion if sold.

InBev has not yet said what parts of Anheuser-Busch it considers non-core. Anheuser-Busch's operations are broad, including a packaging division, grain elevators and factories that make bottles and cans.

But there is a clear incentive to sell the 10 theme parks operated by the Busch Entertainment Corp. division, which have little do with brewing beer and could fetch a high price.

"I would say in all likelihood, the theme parks are the No. 1 thing to go. The only question is: 'Is it now, or later?'" said financial analyst Juli Niemann of Smith Moore & Co. in St. Louis. "It's not (InBev's) business. They do one thing and one thing well. They brew."

Likely suitors might include Merlin Entertainment Group, based in England, or Spain-based Parques Reunidos, Ruben said.

In bidding, those companies would have an advantage InBev enjoyed when lining up the cash to buy the whole company. A weakened dollar means American-based assets are discounted against foreign currencies like the euro and the pound.

High fuel prices tend to push some consumers to cut back on visits to destination parks like Disney World, Ruben said. But regional theme parks that draw visitors from nearby _ a category that includes all the theme parks owned by Anheuser-Busch _ are doing well this summer, he said.

"If times are tough, people won't take a longer vacation. But a day at the theme park can be done on one tank of gas and in one day," he said. "Historically, theme parks have weathered the recession without so much as a blip."

While the parks might be a profitable investment, big U.S. theme park companies don't appear to be in a buying mood. Six Flags Inc. lost $149.9 million during the first quarter of this year. Instead of expanding, the company is looking to streamline its current operations.

Sandusky, Ohio-based Cedar Fair Entertainment Co. paid $1.24 billion nearly two years ago to buy five parks from Paramount Parks Inc. While Chief Executive Richard Kinzel said he didn't expect a dropoff in attendance at parks this summer, the company might be hesitant to take on another round of debt, Ruben said.

Walt Disney Co., meanwhile, tends to invest on its own branded parks and destination attractions, he said.

Anheuser-Busch's theme park employees aren't the only ones uncertain about their future. Unionized workers at the company's breweries have asked to meet with Brito to discuss job security. The union said in a statement it is wary of Brito's commitment to keep all the breweries up and running.

"We know that Carlos Brito, InBev's chairman, has a reputation as a cost-slasher, and always at the expense of workers," Jack Cipriani, director of the Teamsters Brewery and Soft Drink Workers Conference, said in a statement. The union represents more than 7,000 Anheuser-Busch employees in the United States and Canada.

Anheuser-Busch spokeswoman Brenda Williams said Brito was not available to comment Tuesday on potential job cuts or spinning off the theme park division.


On the Net:

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