Anheuser-Busch Cos. rejected an unsolicited $46 billion purchase offer from InBev Thursday, just hours after the Belgian brewer appeared to set the stage for a hostile takeover bid.
Anheuser-Busch Chief Executive August 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.
"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."
Busch said in his letter to Brito that Anheuser-Busch had its own plan to boost its stock price. The stock was trading around $50 before speculation began to simmer about InBev's all-cash offer of $65 a share.
"Our company already has developed a detailed, accelerated earnings growth plan ..." Busch said in the letter. The company plans to expand its cost-cutting initiative, called the Blue Ocean, to save more than $750 million through 2009, and save $1 billion through 2010.
The company also plans to drive additional sales for its core brands of Budweiser and Bud Light through "new consumer opportunities."
The letter does not lay out details for these plans, nor set a specific timeframe by which Anheuser-Busch could boost share value.
Shares of the U.S. brewer fell 41 cents to $61.35 in trading Thursday.