Experts see Anheuser pushing for higher price

NEW YORK (Reuters) - Anheuser-Busch Cos Inc (BUD.N), which has received an unsolicited takeover bid from Belgian brewer InBev NV, has few options aside from negotiating a higher price, according to analysts and people familiar with the situation.

InBev INTB.BR, the world's No. 2 brewer with brands including Stella Artois and Beck's, offered $46.3 billion, or $65 a share, on Wednesday for the iconic U.S. maker of Budweiser and Michelob.

Anheuser said in a statement on Wednesday that it would review the merits of the proposal and decide in due course.

The company's board must now negotiate a better price or quantify how an independent Anheuser can generate equal or higher shareholder value than the InBev bid, Credit Suisse analyst Carlos Laboy wrote in a research note.

A source close to the deal also said Anheuser is expected to refuse the initial bid and hold out for more.

"A-B's best defense is on value. They have their work cut out," the source said, referring to the lack of an obvious rival bidder.

Anheuser, which was once the world's largest brewer, controls nearly half the U.S. beer market with brands such as Bud Light, the world's top seller. But it has been overtaken in recent years as it concentrated on its home market while rivals like InBev and SABMiller Plc (SAB.L) gained scale through international acquisitions.

Meanwhile, the U.S. market has been squeezed as consumers opt for wine, spirits or beers made abroad or in small batches. Besides slowing sales, brewers are struggling with soaring costs for barley and fuel.

"I don't think there's any question that A-B is going to go down," said Tom Pirko, president of Santa Barbara, California-based industry advisory firm Bevmark. "They've painted themselves into a corner in a way that they've reduced virtually all their options to a point where I don't think they can escape."

Pirko expressed doubt that Anheuser-Busch could "grow their way out" from within. "They've squandered 5 years on being U.S.-centric and not doing all the things they needed to do to join the global gang," he said.

Pirko guessed that Anheuser could probably ask as much as $75 per share before InBev would walk away from a deal.

A NUMBERS GAME

Stifel Nicolaus analyst Mark Swartzberg said in a research note that he expects InBev's final bid to be at least a few dollars higher than $65 per share.

"That is because that's the nature of unsolicited bids and a $65 bid is earnings-neutral on $575 million of cost synergies, an amount that press reports say is well below InBev's estimate of $1.4 billion in ultimate annual synergies," Swartzberg wrote.

For its part, InBev called $65 "a full and fair price." InBev plans to finance the deal with at least $40 billion in debt and a combination of equity financing and the sale of non-core assets.

InBev CEO Carlos Brito in a conference call on Thursday declined to specify which assets would be on the block. But analysts pointed to Anheuser's entertainment division, which runs the Seaward and Busch Gardens theme parks, and its packaging supply business. Lehman Brothers has valued those businesses together at around $3.8 billion.

Anheuser could also try selling those units on its own and return the proceeds to shareholders through a dividend or a share buyback, noted Michael Roberto, a management professor at Rhode Island's Bryant University. He said that could be a way to convince shareholders that Anheuser can succeed on its own.

"It's pretty hard to argue why a beer company should own a theme park," Roberto said.

Anheuser-Busch shares were up 5.4 percent, or $3.14, at $61.49 in Thursday midday trade on the New York Stock Exchange. Before speculation of a bid drove the stock up as much as 10 percent last month, the shares had been roughly flat for the last five years.

(Additional reporting by Eleanor Wason in Milan and David Jones in London, editing by Mark Porter and Lisa Von Ahn)