InBev seeks new Bud board in takeover battle

BRUSSELS Mon Jul 7, 2008 7:27pm EDT

Bud Light and Budweiser beer is shown in a cooler at the Toluca Mart liquor store in Los Angeles, June 16, 2008. REUTERS/Fred Prouser

Bud Light and Budweiser beer is shown in a cooler at the Toluca Mart liquor store in Los Angeles, June 16, 2008.

Credit: Reuters/Fred Prouser

BRUSSELS (Reuters) - InBev NV INTB.BR increased pressure on reluctant takeover target Anheuser-Busch Cos Inc (BUD.N) on Monday with a plan to replace the U.S. rival's board of directors, which had rejected its $46.3 billion takeover offer.

Belgium-based InBev filed a preliminary proposal with the U.S. Securities and Exchange Commission that would lead to Anheuser shareholders voting on the board's future.

"InBev is increasing the pressure with this move," said Kris Kippers, analyst at Petercam. "It has also referred to the current weak market conditions. I think the chances are less that it will increase its offer."

InBev, the world's second-largest brewer by volume, said it wanted to give shareholders a voice in its proposed $65 per share takeover of the Budweiser and Michelob brewer in the face of the Anheuser board's unwillingness to talk.

Anheuser said it had told InBev it would be open to considering "any proposal that would provide full and certain value" for its shareholders. Anheuser said InBev has not made a firm offer or provided details of its financing package.

"InBev's non-binding proposal is not a firm offer and could even be lowered. Its proposal is merely an invitation to negotiate," Anheuser said in a statement.

InBev, brewer of Stella Artois, Beck's and Brahma, said it would ask Anheuser's board to set a "record date." InBev's bid to replace the board would succeed if a majority of holders of shares on that date later voted in favor of its plan.

The Belgian company also announced its own proposed board, including Adolphus Busch IV, an uncle of the current chief executive of Anheuser, and current and former executives of major corporations.

Anheuser said it believes its current board "is in a better position to create the best value for its shareholders than a slate proposed by InBev."

The issue of whether InBev has the ability to challenge the Anheuser directors in the proposed consent solicitation is under review in a legal battle between the two companies in the Delaware courts, Anheuser said.

InBev's move to replace the Anheuser board appeared to push InBev's takeover battle at least into the September/October period, analysts said.

"We believe InBev's move slows down a bit the pace of the takeover project," said Wim Hoste, analyst at KBC Securities.

ALTERNATIVE "INDEPENDENT" BOARD

Analysts agreed that InBev had at least sounded out the alternative "independent" board members it was proposing to ensure that they would be supportive of InBev's takeover bid.

But Dresdner Kleinwort's Andrew Holland said he did not believe they would necessarily accept the $65 per share offer.

"I cannot see they would accept having their hands tied... They would have a fiduciary duty towards Anheuser shareholders," he said. "I would be surprised if InBev's opening shot were to be its final shot."

While the latest move did not amount to the launch of a hostile offer, analysts believed the board was likely to see it as a hostile maneuver in any increasingly acrimonious battle.

Some U.S. lawmakers, including both senators from Missouri, where Anheuser is based, have expressed objections to the deal, arguing it could lead to job losses there.

Presumptive Democratic presidential candidate Barack Obama weighed in, saying it would be a "a shame" if the iconic American brewer was acquired by a foreign company.

"I don't think we can pass a law to prevent Budweiser's shareholders -- Anheuser Busch's shareholders -- from selling their company. That's part of the free market system," Obama said. "I do think it would be a shame if Bud is foreign owned."

Anheuser also made a political jab at InBev. It said that InBev, through a subsidiary, has a partnership with the government of Cuba to produce and distribute products in Cuba.

"InBev has not commented on how that would impact business with Anheuser-Busch's customers, nor on its ability to complete an acquisition under U.S. laws that affect acquisitions of U.S. companies by foreign companies," Anheuser said.

InBev said its Cuban business does not violate U.S., EU or international law, and it would continue to comply with those laws if it were to successfully acquire Anheuser-Busch. All aspects of its Cuban business are handled in Europe, InBev said.

"Like many multinational companies, InBev has modest activities that relate to Cuba," InBev said. "The affected volumes (of beer sold) constitute less than 1/2 of 1 percent of InBev's global volumes."

InBev's next approach might be to gauge the appetite of major shareholders, chief among them Warren Buffett, whose Berkshire Hathaway is Anheuser's second-largest shareholder with a roughly 5 percent stake.

He has so far called the battle "an interesting spectator sport," but has not thrown his support behind either side.

InBev stock closed up 0.7 percent at 41.73 euros, compared with a 0.8 percent rise in the DJ Stoxx European food and beverage index .SX3P. Anheuser shares closed at $61.74, up 7 cents.

(Additional reporting by Philip Blenkinsop, Jessica Hall in Philadelphia and Caren Bohan in St. Louis; Editing by Paul Bolding, Leslie Gevirtz)

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