A-B Rejects InBev Bid


Brew Blog

Deems it financially inadequate, not best for shareholders.

As expected, Anheuser-Busch has formally rejected InBev’s unsolicited, $46 billion bid for the company.

Given that InBev earlier in the day made moves suggesting it may target A-B directors, InBev now is widely expected to go hostile.

From an A-B release:

“InBev’s proposal significantly undervalues the unique assets and prospects of Anheuser-Busch,” said Patrick Stokes, chairman of the board for the company. “The proposed price does not reflect the strength of
Anheuser-Busch’s global, iconic brands Bud Light and Budweiser, the top two selling beer brands in the world, with Budweiser selling in more than 80 countries today. The proposal also undervalues the earnings growth actions that the company had already planned, which have significant potential for shareholder value creation; the company’s market position in the United States, the most-profitable beer market in the world; and the high value of its existing strategic investments.”

Here’s the text of a letter A-B sent to InBev CEO Carlos Brito:

June 26, 2008

Mr. Carlos Brito
Chief Executive Officer
InBev nv/sa
Brouwerijplein 1
3000 Leuven

Dear Carlos,
This is to provide you with a response from the Anheuser-Busch board of
directors to your unsolicited and non-binding proposal submitted June 11th.

First, let me express our appreciation for your public comments about
your high regard for Anheuser-Busch, its employees, leadership and
wholesalers, remarking on the success of our company in building iconic
brands and the independence of its board of directors.

We have noted that your letter is expressly not an offer, but only a
non-binding proposal. Notwithstanding the non-binding nature of your
proposal, the Anheuser-Busch board carefully and thoroughly examined all
aspects of your proposal with the assistance of independent advisers.

The board unanimously concluded your proposal is inadequate and not in
the best interests of Anheuser-Busch shareholders. In reaching this
conclusion, the board considered the advice of its independent financial

The Anheuser-Busch board believes that your proposed price
substantially undervalues Anheuser-Busch, its key assets and its prospects,
among them:
— Premier, iconic brands – Anheuser-Busch has built coveted, highly
valued brands over the past 150 years. Budweiser and Bud Light are
among the top 10 global consumer brands and are supported by valuable
marketing properties. Bud Light is the largest-selling beer brand in
the world and Budweiser is the second-largest. These brands have
strong consumer loyalty. Recent change of control acquisitions of other
major consumer product companies with iconic brands have been valued at
much higher multiples than what you have proposed for Anheuser-Busch

— Market leader position – The strength of these brands and the close
relationship the company has with its wholesalers have made
Anheuser-Busch the U.S. market leader with almost 50 percent share in
the world’s most-profitable beer market. In sheer size, the United
States is the world’s second-largest beer market and continues to grow.

— Growing international partners – Anheuser-Busch has large, strategic
investments in two international brewers in important growth markets.
We hold a 50 percent direct and indirect interest in Grupo Modelo, the
leading brewer in Mexico, another very profitable beer market. Modelo
also has a strong, growing business in the United States. We hold a
27 percent interest in Tsingtao, the leading premium beer and one of
the largest brewers in China, which is the largest and fastest-growing
beer market in the world.

— Global brand business – Budweiser is a leading global brand, sold in 80
countries around the world, and is the largest-selling beer in Canada.
Budweiser is the leading international brand in China, the world’s
largest and fastest-growing beer market. We own our Budweiser brewery
in India and recently entered Vietnam. We see strong growth for
Budweiser in Mexico, Argentina, Paraguay and other Latin American

— Accelerated Earnings Growth – Our company already has developed a
detailed, accelerated earnings growth plan that 1.) expands our cost
initiative through an enhanced productivity plan that we refer to as
the Blue Ocean effort to deliver more than $750 million in savings
through 2009 and $1 billion in savings through 2010, while furthering
environmental sustainability; 2.) extends the strong revenue growth
from our brands that we’ve seen over the past five years; and
3.) drives additional volume growth for core brands through new
consumer opportunities and for our successful, higher-margin new

Anheuser-Busch’s beer brand building expertise is an asset without
comparison. Our brands sell in countries around the world and are sought by
consumers everywhere. Our award-winning advertising, U.S. and global
sponsorships and superior-quality image are second to none.

As you state in your letter, there is limited overlap in our respective
businesses. Many of the suggested synergies seem not to be synergies at
all, but are instead profit enhancements. We believe that we can deliver
similar enhancements to our shareholders independent of a transaction, and
have included these enhancements in our accelerated earnings growth plan.

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. From the standpoint of the Anheuser-Busch shareholder,
however, a transaction with InBev at this time would mean foregoing the
greater value obtainable from Anheuser-Busch’s strategic growth plan. We
are convinced that pursuing our program will enable Anheuser-Busch
shareholders, rather than InBev shareholders, to realize the inherent value
of Anheuser-Busch.

While Anheuser-Busch pursues its plan, its board will continue to
consider any strategic alternative that would be in the best interests of
Anheuser-Busch shareholders. The board is open to consider any proposal
that would provide full and certain value to Anheuser-Busch shareholders.

Our two companies know each other well and have a close dialogue and
relationship. This has developed over the years through our joint
agreements in the United States, Canada and South Korea and through our
exploration of other joint business deals. As you say yourself, you dream
big. We respect your desires to grow your company. But your growth should
not come at the expense of our stockholders.
Very truly yours,

August A. Busch IV

cc: Board of Directors of InBev nv/sa



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