ST. LOUIS -- InBev CEO Carlos Brito sent a second letter Sunday to Anheuser-Busch Cos. Inc.'s board warning them that a rumored transaction between A-B and Mexican brewer Grupo Modelo in an attempt to thwart InBev's $46.3 billion takeover bid would have "adverse consequences" to InBev's $65 per share offer, reported The St. Louis Business Journal.
Media reports surfaced last week that Anheuser-Busch has approached Grupo Modelo CEO Carlos Fernandez, also an A-B board member, about possibly combining A-B with the leading Mexican brewer in an attempt to possibly block Belgian brewer InBev's [image-nocss] offer. If A-B acquired the 50% of Grupo Modelo, maker of the Corona brand, that it does not already own, the expense could potentially make an acquisition of A-B too expensive for InBev, analysts cited by the newspaper said.
Brito wrote to A-B president and CEO August 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 and the potential adverse consequences any such transaction could have on the ability of your shareholders to receive our premium offer."
He said an alternative transaction would not "create more value for your shareholders than the $65 per share in cash that we are offering. We are convinced that your shareholders would reach the same conclusion."
Brito reiterated that InBev has the "greatest respect" for Grupo Modelo and would work to accelerate sales of its brands outside of North America.
Click hereto view the full letter.
Anheuser-Busch declined to comment on the letter. The company and Grupo Modelo both declined to comment on reports of a possible transaction between A-B and Grupo Modelo.
Datamonitor said InBev has indicated that if it succeeds in acquiring control of A-B, then it will allow Grupo Modelo to decide its future, revealed Reuters citing a report on CNBC TV. According to CNBC, InBev has indicated that it is fine with keeping A-B's 50% stake, selling it back to Modelo, or purchasing Modelo outright with InBev stock.
Reuters said that InBev may need to raise its bid by more than $3 billion to $49.9 billion to succeed in taking A-B.
"InBev may be tempted to go over a face-saving additional bid premium of say $5/share," Trevor Stirling at Bernstein told the news agency, but added InBev's management and controlling shareholders are so linked to InBev for their personal finances that they will be reluctant to pay more than absolutely necessary.
"Potential talks with Modelo would motivate InBev to consider a higher bid," said analyst Bryan Spillane at Bank of America, while noting that it was unclear whether A-B would offer enough of a premium for Modelo to give up control.
Analyst William Pecoriello at Morgan Stanley also said $70 was possible given premiums paid in other takeovers in the sector. "If [A-B] ultimately agrees to a buyout, we believe it will look for a higher price—at least $70 per share," Pecoriello said, according to the report.
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