BRUSSELS/PHILADELPHIA InBev NV INTB.BR stuck to its original $46.3 billion takeover bid for reluctant target Anheuser-Busch Cos Inc (BUD.N) and said it would give Anheuser's shareholders a voice in the battle if the U.S. brewer refused to open merger discussions.
InBev, the world's second-largest brewer by volume, held to its offer of $65 per share in cash, saying it represented the full and fair value for Anheuser-Busch despite the weak stock markets. InBev reiterated it would pursue all options, but stopped short of launching a hostile takeover bid.
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.
Anheuser-Busch rejected InBev's offer on Friday and set out a plan to cut $1 billion in costs and improve earnings in a bid to convince investors that InBev's overture was too low.
InBev, the Belgian-based brewer of Stella Artois, Beck's and Brahma, slammed Anheuser-Busch's plan as having significant executional risks without any guarantee of a payoff for shareholders. InBev said its cash offer was more secure.
"In addition to guaranteeing immediate value for Anheuser-Busch shareholders, our proposal is predicated on an established track record of international expansion and consistent growth in profitability," InBev said in a statement.
Shares of St Louis-based Anheuser-Busch, brewer of Budweiser and Michelob, closed on Tuesday at $61.94, down 18 cents, on the New York Stock Exchange.
NO PRESSURE TO RAISE BID
Anheuser-Busch's weak stock price makes it unlikely that InBev would be pressured to raise its bid to spark negotiations, one source said.
"If A-B had surged and topped the offer price, it might be different, but right now there's no reason for InBev to budge," said a source familiar with the situation.
"BUD shareholders already would be getting an immediate premium from InBev instead of waiting for a cost-cutting program to pay off," the source said.
InBev would prefer to negotiate a friendly transaction to retain some key Anheuser-Busch executives and the goodwill of employees, the source said.
Yet InBev has already set some legal groundwork in preparation for a possible hostile attack. InBev last week filed suit in Delaware Chancery Court to establish that Anheuser shareholders could remove the entire board of directors.
InBev said on Tuesday the eight directors elected after 2006 were subject to removal and the purpose of the filing was to confirm its belief that the five directors elected in 2006 could also be replaced.
Anheuser said last week it would challenge InBev's claim that the shareholders could remove the board.
"InBev remains committed to the combination and will pursue all available avenues that would allow Anheuser-Busch shareholders a direct voice in the process," InBev said.
Some Anheuser-Busch shareholders have filed lawsuits seeking to force the U.S. brewer to consider InBev's offer, according to court documents obtained by Reuters on Tuesday.
In one case filed on June 27 in the Court of Chancery of the State of Delaware, shareholders said Anheuser-Busch's board breached its fiduciary responsibility by failing to properly consider and respond to InBev's offer.
The lawsuit asked the court to prevent Anheuser-Busch "directors from entrenching themselves and causing the company to take unreasonable and disproportionate defensive measures."
The lawsuit, which sought class-action status, also requested court intervention to prevent Anheuser-Busch from trying to hold negotiations to acquire the half of Mexican brewer Grupo Modelo GMODELOC.MX it does not already own.
InBev would have to raise its offer to at least $70 per share to persuade Anheuser-Busch to negotiate a friendly merger, analysts said.
"The options essentially remain the same after this announcement," said Wim Hoste, analyst at KBC Securities.
"It's a ping-pong match going back and forward. It's still up to InBev to come out with a clear approach."
Bank Degroof said in a research note it believed a friendly combination remained the most likely option, but "it is not unreasonable to assume that some shareholders are expecting a higher offer than $65 per share."
Although unsolicited deals often result in higher offers once negotiations open, some recent deals suggest that a suitor can stick with its original offer and still win. News Corp NWSa.N, for example, won the hand of Dow Jones & Co without sweetening its $5.6 billion offer.
InBev shares closed at 43.25 euros, down 1.9 percent.
(Editing by Phil Berlowitz)