Lee. I read somewhere else recently, but did not save the link, that Labatt USA turned around $30 mil in profit in 2006. So, for grins, let's do the analysis again. Let's say that Drinks did put in a bid and InBev saw the hunger in this company, as well as Kenny's business plan and iconic structure. Then let's say they looked at 8-10 other companies and saw the same old tired business plan with every one of them hoping and praying for a break even year. Most won't come close. Then they saw the hottest beer product about to hit the US scene in 20 years with Kid's beer, the ONLY American beer out there that the American people could latch onto. They knew they already screwed Kenny once on the Rolling Rock deal. Perhaps a "we owe you one" is in order. Then there's the Rheingold deal. "OK, we owe you two." Then the folks at InBev said, "Ya know, these guys are right there, as small as they are, and before we even close the AB deal, they are grabbing the lost market share from the devout AB drinkers who are jumping ship because we bought them. Nobody else is introducing a beer. Iconoclasts is where it's at. They will serve our brand well. Maybe even this Kid Rock guy will want to be a part owner. He'll have the equal initiative to see our brand do well along with his own. He will serve our brand well"
So, as I said before, let's say they did put in a bid and won it. The articles have already circulated that said InBev was selling it at "fire sale" prices. That to me says at or less than one times sales. Let's go with $200 mil for a second. If it were me, I'd have some money like a Kid or a well funded firm to put up the scratch, and then issue them shares along with a stroke on the profits. Let's leave the preferreds out and say 200 mil shares at $1.00 each. We can do that because we just approved it! How convenient. So, now we have 285 mil outstanding. At $30 mil in profits with the rest of the business being break even, that is 10.5 cents per share profit. Any company that has a 3000%-5000% increase in sales overnight usually can support a 30-50 P/E. After all, HANS did and so did JSDA. In fact, they were much more than that. That says that DKAM goes to $3.00 overnight, and more like $5.00.
I do this so, if it should happen, nobody misses out by putting in a sell at 60 cents because it stopped there a year ago. If nobody parts with their shares, then institutions will have to pay an average of $2.00 a share just to get a position!
Maybe Drinks gets lucky and only has to issue 100 mil shares. At 185 mil, now the profit per share goes to 16 cents a share. Low end is $4.80 and should be more like $8.00 on a 50 PE. They can go anywhere between $1.00 to $2.00 on any shares issued to borrow the money because it all will be undervalued. Plus, a big bonus will be those shares are restricted maybe as short as 6 months, but more like 1-2 years. So, we are back to square one with our float being nil as it is now. Nothing changes.
Just think about the financing for Trump at $1.80. Don't you think Labatt would be a little more huge with $30 mil a year in cash flow? Of course it would! Why? Because then Drinks can go buy anybody else profitable without issuing shares on a cash deal because of the cash flow. If they want somebody else big, that's an easy do because they have the leverage of such a strong cash flow set up from the Labatt core on a stock and cash deal going forward.
Beyond that, anything can happen in three years. Drinks is a distributor and does not have a brewery. Does it hinder their chances? Perhaps so. At the same time though, they are securing one now that could easily support both Kid Rock beer and Labatt.
I wonder who is deciding which one to pick.
Eenie....meenie....minee....yo $10.
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