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A-B Blasts InBev’s Move to Boot Board

July 7, 2008

By Jeremiah McWilliams, St. Louis Post-Dispatch

Jul. 7–Frustrated in its attempts to discuss a takeover proposal with Anheuser-Busch Cos., Belgian brewer InBev will urge shareholders to throw out Anheuser-Busch’s entire board and elect a new group proposed by InBev.

Anheuser-Busch slammed the announced maneuver as a self-serving effort by InBev to buy Anheuser-Busch for a price the board of the St. Louis-based brewer recently called “financially inadequate” and not in the best interest of shareholders.

In a press release, Anheuser-Busch questioned whether InBev’s “hand-picked” nominees would negotiate the best transaction for shareholders and said its current directors are better-positioned to create the best value for shareholders.

InBev’s move to toss Anheuser-Busch’s directors puts InBev firmly into hostile territory in its effort to buy Anheuser-Busch for $65 a share, or approximately $47.5 billion. Anheuser-Busch last month rejected the proposal.

This morning, InBev said Anheuser-Busch has been unwilling to engage with InBev in a dialogue to achieve a friendly deal — InBev’s “strong preference.”

InBev’s newly-recruited group of nominees includes Adolphus Busch IV, uncle of Anheuser-Busch chief executive August A. Busch IV.

In a preliminary filing with the Securities and Exchange Commission this morning, InBev told shareholders that its board-replacement proposals are designed to expedite the “prompt consideration” of the takeover plan. Majority support among stockholders “will send a strong signal” to Anheuser-Busch’s board that it should “constructively engage” with InBev, the company said.

Anheuser-Busch argued that InBev has made no attempt to provide an offer that would provide “full and certain value” for Anheuser-Busch shareholders or provided details of its financing, including any conditions attached. Anheuser-Busch said InBev’s non-binding proposal is not a firm offer and could even be lowered.

Anheuser-Busch said it plans to file a “consent revocation statement” with federal regulators to counter InBev’s solicitation of Anheuser-Busch shareholders.

“It won’t be easy for InBev to get a majority of BUD shareholders to agree to consent, but we believe the offer price is fair, albeit a bit on the low side,” wrote B. Craig Hutson, senior bond analyst at Gimme Credit. “We expect InBev to keep the pressure on (Anheuser-Busch), an asset that it deeply covets.”

In a press release this morning, InBev said its plan to replace the board would give Anheuser-Busch shareholders a “direct voice” in the proposed buyout.

“We believe our firm offer of $65 per share reflects the full and fair value of Anheuser-Busch and is a compelling proposal for shareholders,” InBev CEO Carlos Brito said in a statement. “The proposal is backed by fully committed financing and provides immediate certainty of value in a weakened stock market environment.”

Brito criticized Anheuser-Busch’s new plan for cutting costs and raising profits. It involves significant risks and does not address Anheuser-Busch’s “fundamental competitive challenges” in an increasingly global industry, he said.

In a hostile deal, Anheuser-Busch will incur “a lot of pressure” from institutional investors such as pension funds and big banks, said David Millard, a partner at Barnes & Thornburg LLP in Indianapolis.

InBev’s effort to replace Anheuser-Busch’s board does not necessarily preclude a higher offer later, since InBev continues to state that it would prefer a friendly tie-up, wrote Standard & Poor’s analyst Esther Kwon.

“But we think this puts additional pressure on the board to sit down and talk to InBev,” she wrote in a research note Monday.

InBev’s plan to quickly replace Anheuser-Busch’s board may depend on a lawsuit it filed in Delaware. InBev’s lawsuit seeks to get a state court’s confirmation that A-B’s shareholders have the ability to remove all thirteen members of the board without cause.

“We continue to believe (Anheuser-Busch) will be sold to InBev for a $65 or slightly better per share cash price,” analyst Mark Swartzberg of Stifel, Nicolaus wrote in a research note this morning.

InBev disclosed that it agreed to pay each of its nominees to Anheuser-Busch’s board $50,000 and 10 shares of common stock in consideration of becoming a nominee.

jmcwilliams@post-dispatch.com — 314-340-8372

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