A-B to cut $1B in ‘08, ‘09, offer buyouts, in plan to fend off InBev’s bid
One last update: In his closing words on the call, Busch said A-B will fight InBev’s lawsuit, filed Thursday, hoping to unseat board members.
”We will challenge InBev’s claim in their lawsuit that they can remove directors without cause,” Busch said.
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There’d been some speculation in recent weeks that A-B might try to sell its amusement parks or bottling and packaging facilities as part of a restructuring. That’s not on the table, Busch and Baker just said. Given the market, and the company’s plans, they wouldn’t make enough money doing it.
“A sale after tax would not be of benefit to our shareholders,” Busch said.
They think the entertainment division will grow at least 9 percent each of the next few years, and exposes new customers to the Anheuser-Busch brand. And owning their own packaging plants helps the company keep costs in line.
“There’s no financial case for selling those two,” Baker said. “The value estimated in our plan is better than we’d get from selling them.
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Now we’re in the question and answer part of the call, and analysts are trying to pin down Busch and Baker on A-B’s price. The executives are being cagy, not saying they won’t sell, but not naming a price, either.
“We’re not putting a price on the company,” Baker said. “We’re outlining a case for you today on what our strategic plan can deliver and we’re quite optimistic that it will deliver greater value than the $65-a-share offer.”
When another analyst followed up with a question if the board is still willing to negotiate with InBev, Baker referred him to the statement issued yesterday, which says the board “will continue to consider any strategic alternatives that would be in the best interests of Anheuser-Busch shareholders.”
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Baker and Busch both indicated that A-B is willing to continue talking with InBev, but said that the current offer “clearly undervalues” their company.
“Paying $65 a share would be an excellent deal for InBev shareholders,” Baker said. “But $65 a share is clearly inadequate and would represent a transfer in value from A-B shareholders to InBev shareholders.”
They both spoke several times about A-B’s “iconic” brands and dominant position in the profitable U.S. market as key assets that InBev was undervaluing.
“Anheuser-Busch is a truly unique brewing asset and the acquisition of A-B would be unlike any other brewing acquisition given our iconic brands and our substantial market share in the most profitable beer market in the world,” Baker said.
Baker said the new strategic plan will give A-B “double-digit” earnings per share growth starting next year.
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A-B will offer “early retirement packages to” some older employees in the third quarter, with the hopes that 10 to 15 of roughly 1,300 eligible employees take them, CFO Randy Baker just said. He gave few details, but indicated the company hopes to cut roughly $300 million in labor and selling/general/administrative costs.
It also plans to cut the costs of the goods it sells by roughly $700 million through efficiencies and through its supply chain.
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More from Busch, on brands and on an expanded “Blue Ocean” cost-cutting plan.
“Our business is built on brands,” Busch said. “Our brands were built through years of investment and ingenuity,” he said. “Today we continue to increase the value of these brands through marketing and innovation.”
He also said the company will step up its “Blue Ocean” cost-cutting plan, which was planned to slice more than $400 million from the company’s spending over the next four years. Now, Busch said, the target will be “over $1 billion in savings, with the majority this year and next.”
They can do this, he said, because of the hard work of employees.
“Our more than 30,000 employees are truly acting like owners,” he said.
The company also expects to increase beer prices, gaining 4 percent per barrel this year and next.
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In his opening statement, August Busch IV, Anheuser-Busch CEO, says InBev’s offer of $65 a share is too low, “too low relative to the value compared to other transactions in the beer industry and involving iconic brands.”
He also says the cost reductions planned by InBev at $65 a share “assume cost reductions Anheuser-Busch can achieve independently.”
Then he moved on to discuss the qualifications of the board, which includes current and former executives from companies like global companies like AT&T, IKON, JP Morgan.
“This is a board composed of some of America’s top business leaders,” he said.
For more details and background, here’s our story from this morning’s paper on yesterday’s announcement that it will turn down InBev’s $65-a-share takeover bid for the brewer.
Return to this blog to read highlights from the conference call. Or you can listen in to the call yourself by clicking here.
(10 votes, average: 4.6 out of 5)
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Good for them! Hopefully it works. Lights fight for A-B and our beer!