Unsolicited bidders rarely win with opening bid

By Jessica Hall

PHILADELPHIA (Reuters) - InBev NV INTB.BR may hold firm with its $46.3 billion offer for Anheuser-Busch Cos Inc BUD.N, but history indicates that few unsolicited suitors successfully clinch a deal without sweetening their bid.

"In hostile deals reaching a definitive agreement, it is very likely that the initial bid will be increased. Only a small percentage of hostile deals that close do so without such an increase," said Allen Michel, professor of finance and economics at Boston University's School of Management.

The most high-profile exception was media company News Corp NWSa.N, which won the hand of publisher Dow Jones & Co without sweetening its $5.6 billion offer.

"The thinking of most bidders -- with (News Corp Chairman Rupert) Murdoch being the stunning exception -- is that they need to set aside some money to do an increase," said Columbia University Law School Professor John Coffee.

"Murdoch wanted something so badly that he put a price out so high that no one could match it. He may have overpaid even," Coffee said.

Yet InBev, the world's second-largest brewer by volume, has said its $65-per-share cash offer represents the full and fair value for Anheuser-Busch.

The offer marks an 18 percent premium over Anheuser-Busch's record-high stock price in October 2002 and would put the valuation for Anheuser-Busch within the average price range for other beer-industry deals, and above the company's recent cash-flow trading value.

InBev Chief Executive Carlos Brito said last month that $65 per share was the top price the Belgian brewer would be willing to pay. Brito said $65 per share was "a great price, full price, that's it."

InBev has said it prefers a friendly, negotiated transaction, but has laid some legal groundwork to challenge Anheuser-Busch's board in preparation for a potential hostile bid.

InBev and Anheuser-Busch could not be immediately reached for comment.

UNCHANGED BIDS RARELY SUCCEED

The amount of unsolicited or hostile takeover bids has increased as weak stock prices have enticed large corporations with the luxury of cash on their books or the ability to raise funding despite tight credit markets.

So far this year, unfriendly offers accounted for 21 percent of all U.S. mergers and acquisitions of publicly traded companies, according to research firm FactSet MergerMetrics.

That's an increase from previous years, when unfriendly deals represented 12 percent of U.S. merger activity in 2007, and 14 percent in 2006, FactSet MergerMetrics said.

The bulk of those unsolicited or hostile bidders, however, had to raise their offer price to get the deal done.