Anheuser-Busch plan unlikely to please investors
NEW YORK (Reuters) - The restructuring plan Anheuser-Busch Cos Inc (BUD.N) is reported to be working on this week will probably not benefit shareholders as much as InBev NV's INTB.BR $46.3 billion takeover bid, industry experts said on Thursday.
Newspapers reported on Wednesday that Anheuser would launch a defense plan that could raise its own cost-saving targets, sell nonessential assets and issue a special dividend.
The plan could involve Anheuser taking on more debt in a leveraged recapitalization, according to CNBC television. This practice has been diminished by the global credit crisis,
A source told Reuters on Wednesday that the maker of Budweiser was set to reject InBev's $65-per-share bid to create the world's largest brewer. Spokeswomen for Anheuser and InBev declined to comment on what can or will happen next.
Experts said the restructuring would not raise the share price as high as $65 and does not address Anheuser's fundamental performance problems.
Stifel Nicolaus analyst Mark Swartzberg said a plan from Anheuser makes it more likely that shareholders will get at least $65 per share for a deal.
"Management's alternate plan could surprise investors and analysts, including us, and be deemed a near-$65-equivalent. Or more likely, it will simply reinforce the appeal of InBev's all-cash $65 offer, an amount that InBev terms 'full and fair,' not 'best and final'," Swartzberg wrote.
The Wall Street Journal reported that Anheuser is expected to double the level of its existing cost-cutting plan to about $1 billion, explore selling its theme park and packaging businesses, and consider paying a special dividend.
Swartzberg estimated that those steps could ultimately boost Anheuser shares by $10 a share from their level before merger speculation fueled interest in the stock. Swartzberg said the result could boost Anheuser shares as high as the low $60s, which still falls short of $65. Plus, it has the added obstacle of not being "money in the bank," Swartzberg said.
"For this reason and our belief that it is difficult to cut much more than $1 billion in costs from A-B, we believe shareholders are likely to ultimately choose InBev's offer over AB's plans," he wrote in a research note on Thursday.
Another problem is that the plan does not include a response to Anheuser's fundamental business problems, according to Michael Roberto, a management professor at Rhode Island's Bryant University.
"It does not address the longer-term issue of how they're going to reinvigorate growth. It doesn't address the core strategic question of -- the beer market is matured, the U.S. market overall isn't growing and you don't have a huge international presence: What are you going to do about that?" Roberto said.
(Reporting by Martinne Geller, editing by Toni Reinhold and Mark Porter)
