“Anheuser-Busch Cos. Inc.’s shares rose 2 percent Tuesday after London newspaper the Times printed a rumor that a Connecticut hedge fund is positioning itself to offer $44 billion to acquire the St. Louis brewer,” the St. Louis Business Journal reported late yesterday afternoon.
The seemingly venerable Times “report” declared that “ESL Investments, which is run by billionaire investor Edward Lampert, may be about to launch a $56-per-share bid, which would place A-B’s value at about $44 billion,” said the Business Journal. “But the one-paragraph item, printed as the Times‘ ‘Rumour of the day,’ attributed the rumor to ‘The whisper on Wall Street.’ It did not attribute the rumor to any specific sources.”
Nevertheless, the Times‘ rumor fulfilled its own prophecy, with frenzied market activity sending up shares of the “King of Beers” and of Sears Holding Corp., whose stock “reached a record high Tuesday,” reported the Chicago Tribune, “fueled by the latest buzz over possible acquisition targets on Chairman Edward Lampert’s shopping list.” The volume of Anheuser-Busch call options traded yesterday was also nearly twice that traded in all of September.
But amidst all the excitement and speculation, some in the financial press could have benefited from a heavy dollop of the skepticism that the St. Louis Business Journal showed.
“Is this Bud for him?” asked the Chicago Sun-Times, which certainly seemed to think so following the Times of London’s flimsier-than-sorbet “scoop.”
“The Chicago Sun-Times reported in August that Lampert could also be interested in snapping up a stake in, or taking over, Gap Inc., Home Depot Inc. and Radio Shack,” the Chicago Sun-Times now reported in October. “Lampert also has been trading shares in General Motors — a sign the hedge-fund honcho might want to play a role in the automaker’s future.”
In any case, the Sun-Times seemed certain that one of the above five would actually happen, as “Lampert is intent on making a purchase or acquisition with big growth potential because Sears and Kmart sales continue to fall and there are fewer avenues left to boost earnings, analysts say” — and the paper even found one analyst who believes a Lampert takeover of Anheuser-Busch “wouldn’t be too far of a stretch …”
Meantime, according to Dow Jones Newswires, “The rumor mill was on overdrive Tuesday, with takeover talk igniting trading in the stock and options” of both Nabors Industries Ltd. and Anheuser-Busch. Details of the Nabors rumor “were sketchy,” said Dow Jones, but in Bud’s case “the rumor was far more specific”: “Trading in the stock and options on Anheuser-Busch followed a report by the Times of London that the company is rumored to be the latest target for Sears Holding Corp. Chairman Edward Lampert.”
Near the end of its report Dow Jones showed some capacity for reflection, though too little too late: “It’s worth noting that rumors of Lampert’s interest in a company have sparked speculative trading in the past, and in most cases it’s turned out to be unfounded — so far.”
But it was the little St. Louis Business Journal that leveled with its readers more than anyone else.
“Analysts told the Business Journal they put little credibility in the rumor and had heard nothing else to corroborate it,” it reported, turning to one analyst who “said he had no indication ESL or any other hedge fund would be likely to bid on Anheuser-Busch.”
“I wouldn’t bet on it,” another analyst echoed. “You never know, but it doesn’t smell right to me. It’s an awfully big deal, and raising $44 billion is no small feat.”
If only some reporters had chewed on that a bit more.
Edward B. Colby was a writer at CJR Daily.