Anheuser-Busch sets out plan after rejecting InBev

By Brad Dorfman and Philip Blenkinsop

CHICAGO/BRUSSELS (Reuters) - Anheuser-Busch Cos Inc (BUD.N) on Friday laid out a plan to cut $1 billion in costs and improve earnings as it tries to convince investors that InBev NV's INTB.BR $46.3 billion offer for the largest U.S. brewer was too low.

The program, which the company calls "Blue Ocean" was made even as InBev said on Friday it was mulling what steps to take next after Anheuser-Busch rejected its $65-a-share offer on Thursday.

The plan includes cutting 10 to 15 percent of its salaried workforce through early retirement and attrition, speeding up price hikes to cope with rising commodity costs, and setting earnings forecasts that exceed Wall Street's expectations.

The company also said it planned to repurchase a total of $7 billion in shares this year and next, up from its previous repurchase target of $3.8 billion.

"We believe we can create much more value than the $65 a share over the course of time, and we believe also that the $65 a share significantly undervalues the iconic brands that we have," August Busch IV, president and chief executive, told Reuters in an interview.

He declined to give a specific value for Anheuser's total value, but did say that its new 2009 earnings-per-share forecast of $3.90, multiplied by 18 times -- the stock's multiple before the InBev offer -- suggested a $70 value even before considering the double-digit earnings increases it projects after 2009.

The blueprint does not include selling the company's packaging unit or its SeaWorld and Busch Gardens theme parks -- two businesses that some analysts thought the company might divest in order to focus on its main brewing business.

Anheuser-Busch shares were 1.8 percent higher to $62.48 on Friday afternoon on the New York Stock Exchange but were still below InBev's $65-a-share offer.

A BIRD IN THE HAND?

But some analysts questioned whether Anheuser's plan would do much to boost investors' spirits.

"A bird in the hand is worth two in the bush," said Morningstar analyst Ann Gilpin. "Are you going to take your bet that maybe the stock price can go up and management can deliver, or are you going to take $65 (a share) in cash today?"

Brian Rogers, chairman and chief investment officer of T. Rowe Price Group, questioned whether Anheuser-Busch could generate a plan that would raise its shares to $65 and said he would probably sell the shares at $63 to $64. T. Rowe price owned 17.4 million shares at the end of March and was Anheuser-Busch's fifth-largest shareholder.

"I don't think the company can come up with a plan to get the stock up there and keep it up there," he said. "Even a leveraged recap I can't imagine would get it to $65 and keep it there." Rogers was not commenting specifically on the plan the company announced when he spoke to reporters on the sidelines of Morningstar's annual investment conference.

The maker of Budweiser and Michelob beer wrote to reject InBev's takeover bid on Thursday, but left the door open to a higher bid that would create the world's largest beer maker.

InBev, which makes Beck's and Stella Artois beer, was mulling its next move after filing a lawsuit on Thursday to try to establish that Anheuser-Busch shareholders could remove Anheuser's entire board of directors.