Through TheFly's Eyes: Anheuser-Busch Companies, Inc./Hansen Natural Corp.
from Theflyonthewall.com






According to a Beverage Business Insights report, Anheuser-Busch (BUD) and Hansen Natural (HANS) are discussing a potential partnership, which pushed Hansen’s stock up +4.6% before the market opened today.

Brokerage firm Stifel Nicolaus & Company believes there is truth to the report, but noted that the partnership could be as little as a distribution agreement or as large as a complete acquisition of Hansen by Anheuser-Busch. Stifel elaborated on the possibilities, saying, “a potential combination of an alcoholic energy drink bearing Hansen’s Monster name could also make strategic sense for Anheuser-Busch, which has limited success in the energy drink category." Citigroup Smith Barney reiterated their Buy rating on Hansen, saying a partnership could drive growth for Anheuser-Busch.

From the sector’s reaction at mid-day Friday, Wall Street appeared to be siding with a possible Hansen/Anheuser-Busch partnership, if any deal occurs at all. Analysts view a partnership as a solid positive for Hansen: it will expand the company’s reach in all channels of distribution, and may enable Hansen to team up with Budweiser on a new branded beer, energy beer, or other type of energy-alcohol beverage. In early afternoon trading, Hansen was up $5.35 to $124.50, while Anheuser-Busch rose 20 cents $42.97. Meanwhile, competitor breweries also moved higher: Heineken (HINKY) gained 30c to $19 and SABMiller (SBMRY) rose 60c to $20.50. Further, it’s easy to see why any workable deal would enhance Hansen’s value: Budweiser, the oft-stated “King of Beers” is also, in fact, “King of Beer Shelf Space,” with about 30 brands and an astounding 50% market share in the United States, a mouthwatering stat for any distributor. And while in theory Hansen could partner with several competitor brewers to achieve similar goals, many analysts agree that partnering with Budweiser makes the battle for supermarket and liquor store shelf space considerably easier. Hansen already has established a solid presence in convenience stores with its energy drinks.

What does Budweiser get from a potential partnership? The King of Beers gets a chance to diversify further. Budweiser, which also is one of the largest aluminum can recyclers in the world, and a major player in theme parks, gets another hedge against two longstanding consumption trends. While no one is arguing that breweries will disappear overnight, two secular trends bear watching, marketers say: more adults are choosing energy and/or health drinks and shunning alcohol, and among those who do drink alcohol, wine is making steady gains against beer. Budweiser’s potential partnership could very well represent another fortress against any long-term shift away from alcohol, in general, and beer, in specific.

Our Options strategist does not see this news moving Anheuser-Busch’s stock, stating that the option implied volatility of 18 is near its 26-week average, suggesting non-directional price fluctuations.

Our Technical analyst notes that Hansen’s stock has been in a strong, steady and relatively narrow (not all that volatile) channel since breaking out of former resistance (red/green dashed line on chart). There are no guarantees of course with technical factors, but if price can remain within the bounds of the price channel (dashed blue lines) then it will reach $160 by May or June (see chart). That would likely be a hard limit for the price move as we can see by the sloping dashed red line. This appears to be a strong resistance line that has held the stock in check for some time. If price begins to lose upward momentum, the following levels become key supports to observe: $124.14, $118.25, $112.89 (lower limit of the channel today, this gets higher as each day goes by since the channel slopes upward) and $109.85. This last level would actually place the stock outside of the current bullish price channel and would suggest the upside move, at least on this path, is over. There is no resistance on the chart other than today's high and the blue channel lines.


Anheuser-Busch’s stock, on the other hand, is like the "evil twin" of HANS in some respects. It has been in a steady downtrend for almost two years, as defined by the red dashed resistance line on the chart. There have been some potentially bullish developments on the chart that are important to be aware of. First is that price "double bottomed" (came down to the same level, separated by months of time, and the price "held" - dashed green line). Second is that there was a "breakout" above the red resistance line. As long as the stock can continue to hold above this level (minor breaks below are alright as long as the stock does not consistently close below) there is a good chance that the prior bearish downtrend is over. Third is the new short-term bullish channel that has formed. This for now becomes the visual means by which we can judge the nascent uptrend. If price can stay within the lower limit (outside line to right of chart) of the channel and above the red resistance line, then there is a good chance a new bullish trend is under way.

There is one very large proviso and that is that today price is coming dangerously close to that red dashed line. If that line (which is now, importantly, support - $42.75) should break then real doubt may be cast on the viability of the new trend. It may simply be that this is a testing process and that traders will keep hitting this area hard to see if buyers come in instead of selling. How the stock performs during this test (the blue channel line suggests end of next week at latest) is going to determine whether this is truly an "all clear" or if this was just a relief rally within the bearish trend.

Support levels to watch are $42.63 (the "must hold" level) and $41.90 (stock would be firmly back in downtrend). Resistance is at $43.00, $43.65 (near channel midpoint at $43.74) $44.44 and the upper limit of the channel at $44.96.


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