Labatt LBO game back on 13 years later?

News item: The U.S. Deptartment of Justice will require InBev to sell Labatt if it wants to complete its acquisition of Anheuser-Busch.

It has been about 13, or maybe 14, years since I tried to put together a leveraged buyout for then publicly-traded and indepedent John Labatt Limited. The financial analysis was rudimentary, but I had the benefit of a detailed research analyst report from a mid-tier investment bank that made a break-up analysis possible, even for a greenhorn like me.

With a stake in Ault Daries, Labatt Communications (think TSN, Discovery Network), the Blue Jays, the Skydome, the Argos and the various beer assets, the price was so low at the time that you could sell off all of the non-core assets and get the brewery almost for free. Or at least that’s how I remember it.

Had a Q.C. consigliere on board, a leading law securities lawyer and his firm were pitching in pro bono, and I even hired KPMG to check the numbers (they gave me a break and only charged $1200). Bought some of the subscription receipts for my PA to get started. Pitched then investment bankers Rick Byers and Evan Siddall at Nesbitt Burns, in the hopes that they’d help me arrange the financing. Good idea, they said, but in the most polite way they said “we can’t help”. Once I joined the firm a couple of years later I figured out why.

Even tried my best friend in merchant banking. They weren’t interested in a mega deal, sadly, even a proprietary one like Labatt.

In the end, Gerry Schwartz’s team at Onex had a similar idea and launched the reknowned $2.3 billion $24/share so-called hostile bid for John Labatt Ltd in 1995. This was back in the days when private equity was not well known and even less understood. Interbrew came in as a “white knight” at $2.7 billion ($28.50) and won the deal.

It looks as though we’ll all have the chance to do it all over again. The lack of a debt market will cause some to flee, but if the Canadian banks have $9.8 billion for Teck’s acquisition of Fording, the dough for OMERS’ bid for Teranet, and $3 billion to backstop Manulife, you can be sure they have whatever it takes to bring Labatt back home.

Much has changed over the intervening 13 years: Labatt Blue has fallen from the #1 marketshare of 20% to less than 5%; TSN, Ault, the Jays, the Argos, the Skydome, etc. have all been sold off at least once or twice; the London HQ is sadly a shadow of its former self; Molson and Sleeman have also fallen into foreign hands; and since InBev needs a buyer, there will be no hostility to this round of negotiations.

The one thing that hasn’t changed is that Gerry can still outbid me. Best of luck to our friends at Onex (OCX:TSX). Let’s see if the asset is still worth owning.

5:33 p.m. update:

WSJ reporting that only Labatt USA is currently on the chopping block. Too bad.

MRM