Portland Beer Blog: Anheuser-InBev? Not so fast.
Photo by Andrew Harrer / Bloomberg News
Anheuser-Busch CEO August Busch IV told investors on Friday June 27 that his company has a gameplan from brand building: Cost cutting.
The suggestion is that InBev’s £23.3 billion ($46 billion/$65-per-share) bid on Thursday for the company is too low. A-B executives have claimed to have devised a plan to cut around $1 billion of costs from the company between now and 2010. That is an increase the from $500 million in savings A-B mentioned in February.
The savings would be generated by A-B’s “Blue Ocean” program, which is driven by a recognition that “we needed to break from a conservative culture,” Busch said. The plans A-B laid out reveal “a new Anheuser-Busch.”
Busch IV sent a letter to InBev Chief Executive Carlos Brito saying the offer greatly undervalued the largest U.S. brewer, calling the $65-a-share price “financially inadequate” and not in the best interests of its shareholders.
InBev Chief Executive Carlos Brito (AP Photo by GEERT VANDEN WIJNGAERT)
The question is: Will A-B’s plan be enough to persuade investors to pass up InBev’s offer?
Press reports prior to the call suggested that, despite the posturing of the two companies, InBev and A-B might reach a friendly deal – particularly if InBev sweetens the pot.
According to the CNN and the St. Louis AP, Busch IV had this to say to Brito and InBev:
“From your standpoint, we see that now could be opportunistic timing for you to make this acquisition, given the weak U.S. dollar and sluggish U.S. stock market,” Busch said in the letter. “From the standpoint of the Anheuser-Busch shareholder, however, a transaction with InBev at this time would mean forgoing the greater value obtainable from Anheuser-Busch’s strategic growth plan.”
Earlier in the day, InBev filed a suit in Delaware court, where Anheuser-Busch is incorporated, seeking to officially declare that shareholders can remove all 13 members of Anheuser-Busch’s board. Such a declaration could be the first step to rally Anheuser-Busch shareholders to accept InBev’s offer, even if management is opposed to it.
“This is an extremely aggressive step,” said Douglas Cogen, a mergers and acquisitions attorney with the Fenwick & West law firm in San Francisco.
In most acquisitions, a rejection from the target company’s board of directors might draw out a sweeter offer. InBev’s move suggests it’s not interested in a lot of bartering, Cogen said.
“Before this was filed, you could have guessed about whether (InBev) would have another round and upped their bid,” Cogen said. “To sort of come right out and say we’re looking to replace the board … it’s about as aggressive as you can get.”
From Reuters:
KBC Securities analyst Wim Hoste said InBev had two options: either to raise its offer towards $70 per share or go hostile at the existing $65, with a preference for the former.
“I can imagine they might try through informal contact to see if there is scope to talk about an offer. If not then they would take the hostile route,” he said. “But the friendly approach is clearly better for public opinion and the workforce. The company is a U.S. icon.”
According to the Business.Scotsman.com:
Anheuser-Busch’s board members called the offer inadequate, saying it failed to take into consideration its “Blue Ocean” cost-cutting initiative.
This is expected to see a raft of job cuts and the possible sale of the group’s SeaWorld theme park in Florida.
InBev, responsible for Stella Artois and Beck’s and the world’s second-largest brewer, is now likely to approach shareholders directly with their offer.