Anheuser snubs takeover bid; InBev preps for battle

NEW YORK (Reuters) - Anheuser-Busch Cos Inc rejected INBEV NV's $46.3 billion takeover bid on Thursday, calling it inadequate, but the largest U.S. brewer left the door open to a higher bid.

Anheuser's board unanimously rejected the Belgian-Brazilian company's $65-a-share bid to create the world's largest brewer, saying the offer undervalued its assets and its growth plan, which includes a newly revamped cost-cutting program code-named "Blue Ocean."

But Anheuser CEO August Busch IV, in a letter to InBev Chief Executive Carlos Brito, said the board of the maker of Budweiser and Michelob beers will continue to consider any strategic alternative that would be in the best interests of Anheuser-Busch shareholders as it pursues its plan.

"The board is open to consider any proposal that would provide full and certain value to Anheuser-Busch shareholders," said Busch, whose great-great-grandfather turned a small local brewer into an international player.

InBev, for its part, reiterated its "strong preference" for "a friendly combination" but, in a possible prelude to a hostile campaign, filed a lawsuit on Thursday to establish that shareholders could remove Anheuser's entire board of directors.

"This is one step closer to just tendering the shares," Morningstar analyst Ann Gilpin said of the InBev lawsuit.

Anheuser responded by amending its bylaws to strengthen its defenses against overturning control of the board.

Another option could be to go directly to shareholders in a hostile bid, Gilpin said, guessing that it would succeed in getting the required shares tendered.

"If it doesn't (do a tender offer), I think you'll see some very interesting director nominees at the annual meeting next April, assuming the share price is nowhere close to $65, to reopen negotiations with InBev."

A spokeswoman for InBev, which makes Stella Artois and Beck's, was not immediately available to comment after the rejection by Anheuser.

Anheuser shares rose to $61.90 in after-hours trade from their New York Stock Exchange close of $61.35.

PUSHING HIGHER

Anheuser, which has been headquartered in St. Louis since the 1860s, said InBev's bid undervalued a company that controls nearly half the U.S. beer market, owns half of Grupo Modelo in Mexico and 27 percent of China's Tsingtao Brewery Co Ltd <600600.SS>.

Anheuser said its "Blue Ocean" initiative aims to deliver more than $750 million in savings through 2009 and $1 billion in savings through 2010, up from $500 million.

But the plan drew some skepticism.

"Posturing," John Osterweis, chief investment officer of Osterweis Capital Management, suggested.

Morningstar's Gilpin asked: "Would you rather have $65 in cash today or trust that this management team can, through 2010, realize the value of their assets, cut costs by a billion dollars and hope that it is reflected somehow in the stock price?"

"At the end of the day, maybe there's a $70 bid, and it's done," said Osterweis, whose company recently sold a portion of its 1.6 million Anheuser shares.

"It's funny that (Anheuser) didn't say what they think the company is worth, if it's so substantially undervalued," Gilpin said. "I don't think the reason they gave is very compelling." She said it will be hard to convince shareholders that going it alone is best.

Analysts have guessed that InBev was expecting a rejection to its first bid and is likely to continue along its friendly route by offering a higher bid. Most analysts had expected the deal to get done closer to $70 per share.

Michael Roberto, a management professor at Rhode Island's Bryant University, called rejecting the bid risky, since shareholders could get angry if a deal unravels and the company cannot deliver the goals it set out.

"If I were a board member, I'd want to be pretty specific in my restructuring plan. Because then shareholders can assess how much value the plan is going to create," Roberto said. "If they're vague, it doesn't really give shareholders a lot of comfort."

InBev, the maker of Stella Artois and Beck's beers, is the world's second-largest brewer, behind London-based SABMiller , whose products include Miller Lite, Peroni and Grolsch.

(Additional reporting by Muralikumar Anantharaman in Chicago; Editing by Gary Hill)