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Maven: Nip Rumors in the BUD

The brewer runs on media-fueled merger hype and nothing else.

Now it is Anheuser-Busch's (BUD) - Get Anheuser-Busch InBev SA/NV Sponsored ADR Report turn to make a fool's run based on nothing but a lone wolf of a merger rumor initially published in a story built on a solitary anonymous source in a far-flung publication that was, heretofore, unknown to The Business Press Maven. You want to read the original story?

In a "MarketWatch" from

Dow Jones

report with a prematurely exacerbating subheadline if there ever was one: "Deal would be strategically `positive' for Budweiser owner, analysts say." You can judge for yourself -- sort of, kind of. The link to this market-moving story from Brazil is provided in the second paragraph. It's in, uh, Portuguese. So goes the tone and tenor of mergers and acquisitions reporting of late.

Even

The Wall Street Journal

, which should know better, was taking the supposed whisper of the masked man seriously.

Here was its lead: "Anheuser-Busch and

InBev

are made for each other. A merger of the U.S. brewer with its European rival, raised in the Brazilian press yesterday, would make strategic and financial sense."

The

Journal

brought up a sticking point -- the Busch family's significant loss of power in a merger -- but basically dismissed it. Nothing on whether that original report was lame enough to be dismissed. Once something starts getting reported, it magically becomes real.

Investors, if you take only one thing The Business Press Maven ever says as gospel, please let it be this: Never bet the house -- or even the back patio -- on a rumor supposedly whispered by a single unnamed person from Rio.

The

Associated Press

-- among others, to my utter revulsion -- seemed ready to. Look at

its lead late yesterday: "As talk of a merger between Anheuser-Busch Companies Inc. and European counterpart InBev-SA galvanized beer stocks Thursday, analysts considered whether a union could boost the country's biggest brewer."

Consideration was already being given to how high the merger could boost BUD. But even the

Associated Press

notes matter-of-factly (ideally, it would have employed a guffaw) that the unidentified source said talks had been preliminary.

Preliminary talks -- even if this masked man from South America is legitimate -- can mean anything, as anyone ever involved in mergers and acquisitions knows. And by

anything

, of course, we usually mean

nothing

.

But the article was then off and talking about "long-term strategic sense," how BUD's stock was a-movin' and the good earnings of

Molson

(TAP) - Get Molson Coors Brewing Company Class B (TAP) Report

. (No wonder -- with this sort of merger coverage becoming the norm, The Business Press Maven has been drinking heavily.) Then the

AP

plunged further. "With all the positive news," they said, other stocks in the beer sector "also surged."

Diageo PLC

TheStreet Recommends

(DEO) - Get Diageo plc Sponsored ADR Report

and

Boston Beer Company

(SAM) - Get Boston Beer Company, Inc. Class A Report

both rose about 2%.

But let's not just pick on "MarketWatch," the

AP

or the

Journal

. There is plenty of blame to go around, and The Business Press Maven has an inexhaustible supply of snark. Let's glob some on

Forbes

, which weighs in with a

too-clever-by-half headline about how BUD is up on "brewing speculation."

An analyst is quoted saying that "you can't rule this out." That, of course, can be said of any potential merger -- even that of The Business Press Maven and Uma Thurman, who might lock eyes across a crowded room. It could happen. Well, it's not a metaphysical impossibility, I guess.

The reason the analyst gives for his sorta positive outlook? The same whispers were around in November. That settles it! I'm a buyer. Wait. No deal came through in November. So the same rumor in February serves as proof?

Will somebody please crack a bottle of Boddingtons over my head?

It gets worse. The analyst is quoted again in the last paragraph backing away from his it-could-happen-I-suppose endorsement by rightly pointing out that cost savings would be limited because of lack of geographic overlap. But the article ends with the lamest clincher ever, the contention that Budweiser could get "best practices" from its prey. Billions of dollars spent on an acquisition for a grab at the most general piece of business jargon loose in America today. Billions of dollars spent in a quest for, uh, one or two decent ideas.

Well, it all must be true. Some guy in Rio said it was. Read all about it -- in Portuguese. Just, please, don't chase these unsourced, obscure rumors with your hard-earned money.

While I am bullish overall -- I have long liked where the economy is -- these types of merger rumors are a real danger. With so many media outlets and so little time to report, poorly sourced stories gain legitimacy through constant and quick repetition. As The Business Press Maven has

noted recently with such aplomb and enduring brilliance, the same thing happened with

Alcoa

(AA) - Get Alcoa Corp. Report

and

Bristol-Myers

(BMY) - Get Bristol-Myers Squibb Company Report

.

Both were subjects of merger reports so reed-thin and filled with unnamed sources that they never should have been printed. (And The Business Press Maven does not require named sources. I understand the need for anonymity. But at least give me some sense of whom the mystery mouth might belong to -- a senior official of one of the companies in charge of mergers or some dude on parade in Rio who happens to be swilling a Hoegaarden. Or, God forbid, find a corroborating mystery mouth -- or maybe, at least, a second dude swilling Hoegaarden.)

The Bristol-Myers rumors were a classic of the form: They started without identifiable sources -- and then ended by an article that, uh, had no sources. From start to finish, we had no idea whom we were talking to.

Take dictation, readers. Be careful of this crud.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children. Fuchs appreciates your feedback;

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to send him an email.