PHILADELPHIA -- Anheuser-Busch Cos. Inc. plans to reject InBev NV's unsolicited $46.3 billion takeover offer, saying it undervalues the company, a source familiar with the situation told Reuters on Wednesday.
In rebuffing InBev's offer, A-B plans to map out its own restructuring plan soon that would include the sale of the company's theme park operations, The Wall Street Journal reported. The plan also would include layoffs, more than $500 million in cost-cutting efforts and the sale of A-B's packaging unit, The New York Times added.
The timing of A-B's restructuring announcement [image-nocss] was not clear, but the source said the company's board viewed InBev's $65-per-share offer as too low.
Tom Pirko, president of Bevmark, a Santa Barbara, Calif.-based beverage industry consulting firm, said a rejection from A-B sets the stage for InBev to either raise its bid or take its bid directly to shareholders—options he said InBev is likely to pursue.
Analysts had speculated InBev may have to raise its offer by more than $3 billion, to around $70 a share, to woo its shareholders into a deal to create the world's largest brewer, making a quarter of the world's beer, said the report.
InBev is prepared to take its bid directly to A-B shareholders through a tender offer, the Journal said. InBev has yet to decide whether to pursue such a course, however.
"It would be surprising to think that Brito, with a bone already in his mouth, would take it out," said Pirko, referring to InBev CEO Carlos Brito.
A-B has few takeover defenses to thwart a hostile offer, making it feasible for an unwanted suitor to acquire the company, Reuters said.
InBev on Wednesday prodded A-B by saying it remained available to discuss the bid, but stressed that time was "of the essence."
InBev said it had commitment letters for the financing for the deal and has paid $50 million in commitment fees to a 10-bank lending group.
It has been two weeks since the Belgian-Brazilian brewer—the maker of Stella Artois and Beck's—launched its bid for St. Louis-based brewer A-B, but the maker of Budweiser and Michelob has yet to respond.
Analysts have said that if Anheuser puts off negotiations for too long, InBev may just take its offer directly to shareholders in a hostile bid. That could be bad for Anheuser, analysts have said, since InBev's bid would give shareholders a significant premium that A-B would have trouble matching on its own.
The $65-a-share offer, which tops A-B's all-time high, is 24% higher than the stock's closing price the day before reports of merger talks surfaced, and 35% higher than the average share price over the preceding month. Shares of A-B closed on Wednesday at $61.76, up 63 cents, or 1%, on the New York Stock Exchange.
Any reorganization is expected to include "scores" of layoffs, which could anger unions and local politicians in St. Louis, who had pressured A-B to reject the bid in an effort to save jobs, the New York Times reported.
If Anheuser-Busch tries to sell its 10 amusement, marine and water parks—including SeaWorld and Busch Gardens—that drew more than 22 million customers last year, it may find it difficult to find a buyer in the weak U.S. economy, analysts have said. Busch Entertainment Corp, Anheuser's theme park unit, last year accounted for almost 8% of the company's sales and net income at $1.27 billion and $162.9 million, respectively. Lehman Brothers valued Anheuser's theme park business at $2.9 billion, said Reuters. Historically, such assets have attracted bids topping 10 times cash flow, but the sputtering economy could weigh on any sale price and multiples may hover in the high single digits, analysts said.
Analysts and investors had expected the A-B to respond slowly as it explores a restructuring, or other options, which may include trying to buy out Mexican brewer Grupo Modelo, Reuters said. A-B owns 50.2% of Corona-brewer Modelo, but has no management control.
Billionaire investor Warren Buffett, whose Berkshire Hathaway is A-B's second-largest shareholder, told CNBC on Wednesday that he viewed the beer battle as "an interesting spectator sport" but had not thrown his support behind either side. Barclays Global Investors, the funds arm of British bank Barclays Plc, is the largest shareholder in A-B, the news agency added.
Meanwhile, London-based SABMiller would not say if it was in talks to buy Modelo, after speculation that the world's biggest brewer would acquire the Mexican beer company, said Reuters. Sources close to the situation say SABMiller has held informal talks with Grupo Modelo on the possibility of it acquiring part or all of Modelo in the event that InBev succeeds in its proposed takeover of A-B.
Analysts expect family-controlled Modelo to refuse A-B's advances, leaving it with few weapons to block InBev's unsolicited bid.
Chris Gilmour, an analyst with Absa Asset Management Private Clients, told Reuters that while SABMiller might prefer to buy out Mexican brewer Femsa, which makes Sol, to expand in the region, Modelo seemed a more likely target. If the Modelo family did sell out, it was likely to have a list of suitors, including SABMiller; however, A-B has a right of first refusal to buy out the 50% it does not already own in the Mexican brewer.
Gilmour said A-B's attempt to buy out Modelo in a bid to fend off a bid from InBev would have annoyed the Mexican brewer, leaving it open to other suggestions.
One likely option was that InBev might have agreed with Modelo that SABMiller would buy out the 50% that A-B owns, he said.
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