updated 7/1/2008 12:31:44 PM ET 2008-07-01T16:31:44

The brewer InBev SA on Tuesday urged Anheuser-Busch Cos. Inc. shareholders to challenge the biggest U.S. beer company’s rejection of its $46 billion buyout bid.

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InBev CEO Carlos Brito insisted in a statement that his offer of $65 a share was “full and fair” and would give shareholders immediate certainty as stock markets plunge.

The Belgian-based maker of Stella Artois and Beck’s has already set the scene for a hostile takeover battle, by saying it would “pursue all available avenues that would allow Anheuser-Busch shareholders a direct vote.”

Last week it filed suit in Delaware, seeking a declaration that half of all shareholders could oust the company’s 13 board members without cause.

It said it wants to confirm that the five directors elected in 2006 could be removed by shareholders, saying it is clear that the other eight could be pushed out.

The Anheuser-Busch board on Thursday rejected InBev’s offer as “financially inadequate,” offering instead a plan to boost earnings growth to win shareholder support for staying independent. The St. Louis-based company accounts for about half of the U.S. beer market with brands that include Budweiser, Bud Light and Michelob.

In a transcript of a Friday investor conference filed with the Securities and Exchange Commission, CEO August Busch IV said the board had taken InBev’s proposal “very seriously” but it did not reflect the value of the Budweiser brand or other beer industry combinations.

“The value InBev claims to offer in proposing $65 per share assumes cost reduction Anheuser-Busch can achieve independently,” he said.

Anheuser-Busch is promising to make $1 billion in savings over the next three years, shaving up to 15 percent of workers from its payroll by encouraging more to take early retirement, cutting other costs and borrowing InBev’s zero-overhead plan to justify expenses.

It is also promising to expand Budweiser in China, saying rapid growth there would have an important impact on earnings. Overall cash flow would increase by $350 million next year from 2007, it said.

It also wants to increase the value of its shares — and give holders who want to sell an alternative to InBev’s offer — by spending up to $7 billion buying back shares this year and next year.

Brito blasted that plan as having “significant execution risks.”

Instead, he said InBev offered an established track record of international expansion and consistent profitability that would see the company gain “unmatched economies of scale in a period of rapidly escalating commodity prices.”

He said InBev would have preferred constructive dialogue with the U.S. brewer of Budweiser and was “surprised” not to hear from Anheuser-Busch before it publicly rebuffed the bid.

Again InBev made no move to raise its offer, saying it gives shareholders an immediate cash premium of 35 percent above the 30-day average share price prior to recent market speculation.

The $65 offer for each share is also 18 percent above Anheuser-Busch’s previous all-time share price high in October 2002, it said.

Anheuser-Busch shares were down 49 cents at $61.63 in midday trading on Tuesday.

InBev’s bid would create by far the world’s largest brewer, binding together a set of strong brands and a large global footprint. Based in Belgium, InBev now pulls most of its profits outside of the stagnant beer-drinking markets of North America and Europe, focusing instead on emerging economies in Latin America, Asia, eastern Europe and Russia.

But the company’s aggressive cost-cutting has spooked some in the United States.

Several politicians have come out against the deal, saying it may create a near-monopoly in the U.S. beer market and damage the economy in the company’s home state of Missouri by shedding some of the 6,000 workers the company employs in St. Louis.

InBev has promised not to shut any U.S. breweries and to keep the company’s North American headquarters in St. Louis.

The beer industry has been consolidating in recent years amid rising costs for transport fuel and key ingredients.

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