Anheuser Busch Turns Away InBev
Sixty five dollars a share is not enough, but analysts believe a $70 per-share-bid would force the company's hand.
June 27, 2008
Anheuser-Busch Cos., as expected rejected InBev's bid to acquire the brewing giant, an offer that had valued the company at $65 a share or $46 billion. InBev, however, aims to carry on with the bid, and noted via a statement that it is seeking a ruling in Delaware "regarding alternative routes to progress the combination."
In a letter to InBev chief executive Carlos Brito, the Anheuser Busch board called the proposal "inadequate," citing that it didn't properly value the company's market leading position or iconic brands. "Recent change of control acquisitions of other major consumer product companies with iconic brands have been valued at much higher multiples than what you have proposed," the board said in the letter.
Moreover, Anheuser Busch pointed to its plan to grow earnings, detailing that it has enhanced its productivity plan, and now forecasts $750 million in savings through the end of next year and $1 billion in savings through 2010. In a statement, Anheuser Busch's lead independent director Douglas Warner III noted: "The InBev proposal fails to be competitive with alternative plans the company has developed in recent months to generate significant top-line and bottom-line growth... The board will continue to consider all opportunities that build shareholder value."
InBev, meanwhile, hinted in its public response that it could go hostile, stating that as part of its query to Delaware regulators, it was seeking a judgment to confirm "that shareholders acting by written consent may under Delaware law remove without cause all thirteen of the present Anheuser-Busch directors, including the five elected in 2006."
Analysts at Credit Suisse stated in a client note that they believe it is "unlikely" all 13 boardmembers can be replaced, but added that the threat served as "a timely reminder" to the target.
Meanwhile, Banc of America analysts agreed that Anheuser Busch's alternative growth plan could imply a valuation in line with InBev's bid, but noted that either a $70 or $75 per share offer, depending on Ebitda projections, "would likely push the [company's] valuation beyond it's standalone threshold."
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