InBev tells Anheuser-Busch not to pursue 'alternative' deal
InBev NV, which is seeking to take over Budweiser maker Anheuser-Busch Cos. for $46.3 billion, told the U.S. beermaker not to pursue other transactions following reports it approached a Mexican affiliate to thwart the unsolicited bid.
``It is our strong belief that no alternative transaction that you could effectuate would create more value for your shareholders,'' Carlos Brito, chief executive officer of the Leuven, Belgium-based brewer, said in a letter today to Anheuser-Busch CEO August A. Busch IV. ``We would expect that prior to proceeding with any alternative transaction, especially if your shareholders will not be given the opportunity to vote on it, you would first fully explore our offer.''
Anheuser-Busch has contacted Mexican brewer Grupo Modelo SAB's CEO Carlos Fernandez on a possible combination, the Wall Street Journal reported on June 12. Buying Modelo, which is 50 percent-owned by the U.S. company, might allow Busch to make his company too expensive for InBev to buy.
``I think this is one of those cases where you have this natural conflict that exists between the shareholders' interest and management's interest,'' Donald Yacktman, president of Yacktman Asset Management Co. in Austin, Texas, said in a telephone interview. InBev may be saying ```you'd better be careful or you might get sued,''' Yacktman said.
Warren Buffett, whose Berkshire Hathaway Inc. is Anheuser- Busch's second-biggest shareholder, plans to speak with Busch this week about the bid, the Guardian reported, citing unidentified sources close to the deal. Busch requested Buffett's opinion, and the investor may recommend that the Busch family consider discussions with InBev, the newspaper said.
World's Biggest
InBev's bid of $65 a share seeks to create the world's largest brewer by sales volume. An Anheuser-Busch combination with Leuven, Belgium-based InBev would unite Budweiser, first brewed 132 years ago in St. Louis, with Stella Artois, Bass and more than 200 other InBev brands.
Grupo Modelo, based in Mexico City, said in a statement last week that it plans to remain a Mexican-owned company and will make any needed decisions should Anheuser-Busch and InBev decide to merge. Fernandez is on Anheuser-Busch's board.
St. Louis-based Anheuser-Busch fell 28 cents to $61.12 on June 13 in New York Stock Exchange composite trading. InBev fell 78 cents, or 1.6 percent, to 49.43 euros in Brussels.
InBev said June 11 it intends to pay for Anheuser-Busch with at least $40 billion of debt arranged by lenders including Banco Santander SA.
Weighing Decisions
``It is our policy to not confirm, deny or speculate on rumors of potential investments, acquisitions, mergers, new business partnerships or other transactions,'' Anheuser-Busch Chief Financial Officer W. Randolph Baker said in an e-mailed response to InBev's statement. The company said June 11 that it will make a decision on InBev's offer ``in due course.''
The Busch family, which has run the brewer for five generations, doesn't have enough shares to block a purchase from InBev with a shareholder vote. Anheuser-Busch executives and directors, both family members and outsiders, control a total of 4.5 percent of the brewer's stock, according to a March regulatory filing.
For the rest of company's shareholders, the $65-a-share offer is ``hard not to accept'' without or without Busch family support, said Yacktman, who manages 214,120 shares of Anheuser- Busch.
Barclays Global Investors owns the most Anheuser shares, with a 6.1 percent stake, according to data compiled by Bloomberg. Buffett, with 5 percent of the shares, has owned the stock since April 2005.
Room to Buy
An Anheuser-Busch purchase of Modelo wouldn't necessarily stop InBev, Craig Hutson, a senior analyst at independent researcher Gimme Credit LLC in Chicago, said in an interview last week. If InBev is willing to drop below investment grade, the brewer could take on another $10 billion or more in debt to purchase both.
Beer exports, mostly to the U.S., accounted for 42 percent of Modelo's sales in 2007. The company has three of the seven most popular imported beer brands in the U.S.: Corona, Modelo Especial and Corona Light. InBev repeated today that it plans to ``explore possible ways to expand the availability of the Grupo Modelo brands outside of North America.''
InBev executives said last week in a conference call that they plan to raise $8.3 billion by selling divisions and issuing shares. Anheuser's theme parks, which include Sea World, and its packaging unit are probable targets, Carlos Laboy, an analyst at Credit Suisse Holdings USA in New York, said in a note to investors.
Buying Spree
In a 20-year acquisition spree, InBev grew from family- owned Flemish beers to surpass Anheuser-Busch as the largest brewer by sales and came to dominate Latin America. A purchase of Anheuser-Busch would be the second-biggest acquisition of a consumer-products company after Procter & Gamble Co. bought Gillette Co. for $57 billion in 2005. It would be the biggest cash acquisition on record.
August Busch IV is opposed to a sale, the Wall Street Journal reported, citing unidentified sources. He told distributors at an April meeting in Chicago that a sale of the brewer wasn't going to happen ``on my watch,'' said John Economos, CEO of Eagle Rock Distributing Co. in Atlanta, who attended the event.
Some family members support negotiations with InBev, while others oppose it, the Journal said, citing Adolphus Busch IV. Directors are similarly split, the newspaper said. (Bloomberg)
- Duane Stanford and Caroline Salas
