"InBev's proposal significantly undervalues the unique assets and prospects of Anheuser-Busch," said Patrick Stokes, chairman of the board for the company. "The proposed price does not reflect the strength of Anheuser-Busch's global, iconic brands Bud Light and Budweiser, the top two selling beer brands in the world, with Budweiser selling in more than 80 countries today. The proposal also undervalues the earnings growth actions that the company had already planned, which have significant potential for shareholder value creation; the company's market position in the U.S., the most-profitable beer market in the world; and the high value of its existing strategic investments."
The board "thoroughly studied the proposal with independent financial and legal advisers on multiple occasions during the two-week period since the proposal was made, and the board's independent directors also met alone to fully examine its merits."
"The InBev proposal fails to be competitive with alternative plans the company has developed in recent months to generate significant top-line and bottom-line growth, which will increase value for the company's shareholders," said Douglas A. Warner III, the board's lead independent director. "The board will continue to consider all opportunities that build shareholder value."
InBev responded to the rejection by stating that it remains committed to its proposal to create the world's leading beer company through an acquisition of all the outstanding common shares of Anheuser-Busch Companies Inc. at $65 per share in cash, representing an immediate premium of 35% over the unaffected share price and a premium of 18% over the previous all-time high in October 2002.
Carlos Brito, chief executive officer of InBev, said, "Our firm proposal of $65 per share reflects the full and fair value of the company. The proposal is backed by fully committed financing and provides immediate certainty of value in a weakened stock market environment. Our firm proposal was rejected in favor of a newly formulated management plan with significant execution risks.
"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. This combination would create a stronger, more competitive global company with an unrivaled worldwide brand portfolio and distribution network, as well as unmatched economies of scale in a period of rapidly escalating commodity prices. It would provide unparalleled opportunities for consumers, employees, wholesalers, business partners and communities.
"Given the seriousness of our firm proposal, we were surprised that we did not hear from Anheuser Busch's board of directors, management or advisors prior to the rejection.
"InBev's strong preference is to enter into a constructive dialogue to achieve a friendly combination that comprehensively addresses the interests of all constituents. At the same time, InBev remains committed to the combination and will pursue all available avenues that would allow Anheuser-Busch shareholders a direct voice in the process.
Earlier, InBev filed suit in Delaware to confirm that Anheuser-Busch shareholders have the ability under Delaware law to remove without cause all 13 members of the Anheuser-Busch Board. Under Anheuser-Busch's charter and Delaware law, it is clear that the eight directors elected after 2006, who together constitute a majority of the Anheuser-Busch Board, are subject to removal and replacement without cause through the written consent procedure. The purpose of the filing is "merely to confirm InBev's strong belief that the five directors elected in 2006 may also be removed and replaced through that same mechanism."
In other news for the American beer giant, Anheuser-Busch agreed to stop producing caffeinated alcoholic beverages after a successful push by 11 state attorneys general and a Wake Forest University study that links the beverages to heavier drinking by college students.
The attorneys general were concerned that aggressive marketing campaigns had created a false impression that the caffeine in the drinks would counteract the intoxicating effect of the alcohol.
A study conducted by researchers at Wake Forest University Baptist Medical Center found that college students who consume energy drinks along with alcohol are more likely to drink more, get hurt, ride with a drunken driver, and commit or suffer acts of sexual assault.
The attorneys general were particularly concerned with prepackaged, caffeinated alcoholic beverages and the marketing of those drinks.
"They drink more, thinking that the stimulants will offset the effects of alcohol, and they do not," said Steve Rowe, the attorney general of Maine and the chairman of the National Association of Attorneys General Youth Access to Alcohol Committee.
"Whether these are premixed or whether you're mixing energy drinks with alcohol, it's a problem, and it's very dangerous," Rowe said.
The settlement stemmed from efforts to stop the production of two energy-alcohol drinks, Tilt and Bud Extra, both made by Anheuser-Busch.
The company did not admit that the drinks were marketed to youth. However, it did agree to stop producing alcoholic energy drinks and to reformulate Tilt and Bud Extra to remove its two key stimulants, caffeine and guarana.
"Although Bud Extra and Tilt met all regulatory requirements, had much less caffeine than a Starbucks coffee, and had received all necessary federal and state-agency approvals, we are reformulating these products in response to the AGs' concerns," Francine Katz, the vice president of communications and consumer affairs for Anheuser-Busch, said in a news release.
Rowe said that the attorneys general were satisfied with the company's decision to discontinue producing alcoholic energy drinks.
"The states got exactly what we were hoping to get," he said.
Attorneys general are continuing to investigate other companies that make similar products, he said.
Dr. Mary Claire O'Brien, the lead researcher of the Wake Forest study, said that many attorneys general had contacted her about her study, a Web-based survey of 4,271 students from 10 universities in North Carolina. The results of the study were initially released in November.
O'Brien said she hopes that the settlement will spur the FDA to start regulating alcoholic energy drinks.
Anheuser-Busch contends that its marketing strategy for Tilt and Bud Extra emphasized on-site promotions at licensed retailers, and not TV, print or radio ads more likely to reach people under the legal drinking age.
"We know that adults will continue to drink caffeinated cocktails like rum and Coke, coffee martinis, and Red Bull and vodka," the company said.
"Nevertheless, we have determined that competing in the prepackaged caffeinated alcohol beverage sector may detract from our reputation as the global industry leader in promoting responsibility among adults who drink and discouraging underage drinking," it said.
From the July 7, 2008, Prepared Foods e-Flash