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.
Good for them! Hopefully it works. Lights fight for A-B and our beer!
Well I have supported AB standing their ground until now. It makes me angry that they will stick it to the little guy (workers)by laying them off, so they can keep daddy’s company that they did not safeguard. Remember AB what goes around, comes around.
This seems to be a dog and pony show, no real substance. As a stock holder when are these changes going to be implemented, and when can we expect to see the trading value to exceed $65 a share?
Again I love the statement that the $65 offer is “too low relative to the value compared to other transactions in the beer industry and involving iconic brands.” when the stock has not seen $55 or better in a long time.
I always go by the rule something is only worth what someone will pay for it, and prior to this offer that value was rather stagnant at around $50 a share.
what a bunch of double talk. wonder who wrote simpleton IV’s comments. looks like they are going to stick it to the rank and file just like all of you said inbev will do. the fat asses will keep their jobs.
I work for AB and I am all for them doing anything to keep InBev out of the states. You think laying off a few people now is bad, wait until InBev gets here and decides that they really don’t want to keep the corp offices in St Louis and move them to the east coast. Yes the owners made a mistake to safeguarding the company, but again, wait until InBev takes over. All the people that said AB has ths coming will be crying in your foreign owned beer. If InBev takes over, that will leave Sam Adams as the largest US owned brewery…what a sad day that will be for America.
If anyone thinks the Board or the Busch’s wont stick it to the worker or the shareholder to stay in control, or put dollars in their pockets are living in a fantasy land.
This just kicks off the who’s gonna buy AB sweepstakes, and InBev is the first contestant. I would guess that if InBev backs out the stock is going to crater, and it will end up with someone like Kirk Kerkorian or Carl Ichan owning it. Didnt St. Louis used to have a airline that Carl Ichan owned? how did that go………..
This was expected. InBev is now going the hostile route, which in all reality is going to make them show their true colors as to what the future of the AB brands will be.
One thing I find interesting though, since the rumors of the buy-out started the AB stock (NYSE: BUD) has jumped around the $62/share mark. But at the same time the InBev stock has dropped to $45/share on the Euromarket. They peaked at……. $65/share in 9/2007 and have yet to recover. For more fun facts, check the InBev total shares and market value (stock symbol INB).
There are two factors at work here - a takeover bid by a potential foreign owner, and today’s market’s pulse. They’re not interdependent - AB, like most companies, will have to go on a diet or begin to drown. Just ask yourself who you would prefer to prescribe that diet - AB or InBev. Budweiser is iconic, even if not the best quality beer out there. What is the point of letting a Belgian company take it over if it’s not even going to be Belgian beer, anyway?
I think some of you are jumping the gun here… they don’t actually mention layoffs in this article and people are assuming… and we all know what assuming does. Sure they plan on cutting $300 million dollars in labor but notice that includes other costs as well. They may do some layoffs, but I don’t think it will be on any sort of grand scale as it would be with InBev taking over. Besides, regardless of whether InBev had made an offer or not, these cost cutting strategies needed to happen eventually to help keep the company profitable in the faltering American economy and dominant in the huge beer market. It’s business.
All-in-all, I think A-B is just pushing for a higher bid from InBev, not necessarily trying to fight out of it.
The drop in stock value of a purchasing company usually does drop as the dividends will be lower in the short term as more profits go to pay for the purchase. So, short term investors dump and run.
We don’t get the full story here either from the board or the Post. My inside sources have told me there is much more going on then what they told stockholders, which really isn’t a surprise.
One thing I really find ironic is that a large number of shares of the stock is held by hedge funds (see your 401K), pension plans etc. They seem to be the ones who are really pushing to cash in (see no tax consequences). What I find ironic is that they depend on the working public to exist…lets force companies to lay off thousands of employees… seems like cutting your nose off to spite your face. The first lawsuit files was by a New Jersey Pension plan that represents union workers. Both those unions really look out for one another don’t they??? It all depends on whose ox is being gored.
I back A-B doing anything it takes to keep the business where it belongs- in St. Louis, MO, USA. Early retirement packages will be a grateful acceptance by employees who have spent numerous years keeping the company going. These folks will walk soon as InBev takes over anyway. Everyone who thinks A-B’s plan is so horrible is kidding themselves. What do you think InBev is wanting to do with the company… carry on its 100+ yrs worth of American traditions? The packaging centers, call centers, bottle manufacting plants… everything that A-B does to stay “American” will be shipped overseas to cut costs and jobs. How many thousands will loose out then? Anyone every notice how much A-B does for the “common man” through donations and such. Visit Grants Farm just once with your family - its free thanks to Anheuser-Busch doing its part. How much water is being donated to flood victims thanks to A-B? And countless other donations…
I will gladly pay more for an American beer made by Americans for Americans!!!!
Some of you complain about A.B. stock price. Do you people follow the us markets at all. Every thing is down this year, lets face it people the U.S economy is in shambles right now, as soon as George is out I’m sure it will turn around but we have to keep great compamys like A/B american. I dont care if they offer up early retirement to cut cost they need to do what it takes to emerge from this as an american owned company. NO I dont own any share of bud only because I can not afford them but if I did I would vote no on selling. To some of us there are more important things in life than money.
WE ARE SUPPOSE TO BE PROUD AMERICAN’S,BUT WHAT’S LEFT TO BE PROUD OF IF WE KEEP SELLING OFF OUR COUNTRY.WHAT’S NEXT WASHINGTON MONUMENT, STAUTE OF LIBERTY,MOUNT RUSHMORE HOW ABOUT WE JUST RENT OUT THE WHITE HOUSE.WE CANNOT BE CONSUMERS IF NOTBODY IS WORKING BESIDES DON’T YOU THINK WE HAVE SENT ENOUGH JOBS OVERSEAS LETS KEEP THIS ONE AT HOME. BESIDES IF WE WHATED INBEV PRODUCT’S WE WOULD BUY THEM.
Don’t let the first few posts fool you, they were by Inbev exec Carlos Brito to try and scare Americans and AB’s board into rolling over. Would InBev sign a contract stating they wouldn’t cut jobs, move operations, etc for X amount of years? Notice they won’t give a promise like that.
kdunlap–Those pension funds and mutual funds you mention are bound by their fiduciary responsibility under US law to consider what best benefits their plan participants and investors. The people who run the GM retirement plan aren’t allowed to consider what impact the transaction may have on AB’s workers.
Also, who has a hedge fund in their 401(k)?
scott forsythe–the problem with AB’s share price is that it never went up during the bull market of the mid 2000’s. It’s not like their price is down because the market went down–they didn’t go up when everyone else did so. I’m no fan of the President, but just like almost every other President before him he didn’t have much of an effect on the economy. The economy will pick up once the housing market stabilizes and financial institutions understand what loans they actually have on their books–not because Obama or McCain becomes President.
davulture–I agree that loss of AB’s charitable impact would be the worst impact of this deal.
Let the games begin–I don’t think there is anyone else out there who would acquire A-B. They are way too big to be bought out by private equity, and no other company is large enough to buy them but with a small enough US market presence to pass the antitrust review.
I still think AB is just fighting to get a higher takeover offer.
As a St. Louisian, I am sympathetic to AB’s board and its employees. As a shareholder, AB has not come close to justifying rejection of InBev’s offer. While I– with my extremely minor holdings– might consider factors other than what will make me the most money, most AB stock is own by mutual and pension funds. The funds managers have obligations to maximize value. So far, only InBev has offered them something they can support. We have a market-based economy; this is the downside to it.
Yes quite a bit of corporate double-speak. I wonder if the AB Execs truly know where they are wasting money. It needs to start with executive salary cuts, since they got themsevles into this mess of overspending, particularly on outsourcing and offshoring. There top execs are consistently in the top 10 of corporate salaries in the area. They have proven they aren;t worth it.
AB could actually save money by hiring some of their “consultants” and contractors and paying them what they are truly worth. They pay 20K/mo or more for one person that could hire outright for about 5-10K counting full benefits! This is where they are loosing money, but the bean counter would have you believe otherwise. 20K business expense vs 5K payroll expense seems like a no brainer to me!
How about offshoring to India, they get no value for their dollar there. They might as well set fire to a pile of money out on 7th street, it will get them the same result. India is way overrated and only serves to frustrate their employees when they can’t get the problem resolved. It ends up in the hands of an overpaid contractor!
Don’t forget that AB is not filling 300+ open jobs and will probably not hire anyone in the next two years. They are going to put an end to their Co-Op and intern program. AB is pretty much telling the next generation to go f*ck off.
Honey, some of the same folks you sit on boards with fire whistleblowers and others without cause, so why do you think InBev can’t shaft YOU without cause? Hurts when the jock is twisted around YOUR family jewels, doesn’t it? Your act is expected though since you don’t want to be sued by stockholders personally. God, what would you do without corporate protections? I doubt that parents whose kids have been killed by drunk driving because you insist on pushing your dangerous drugs to kids feel one bit sorry for you right now. You caused more damages than good over the years. Only folks defending you have drinking problems.
You all are sitting here half-crocked on AB products while women are fighting your wars for you and all you can worry about is beer while america gets her butt royally kicked by folks with few resources in the sands? No wonder your position in the world has fallen so much. Your kids are ignorant compared to other countries and your wall street executives have cheated the world out of so much. yet all these STL rednecks are worried about is their beer. No wonder the world laughs at you!
AB has to do what is necessary to fend off the Inbev hostle takeover. They need to trim down in order to be a helathier company. They have failed the city, however, in their lack of foresight and planning by not anticipating this.
You would think that there is more worth considering than the shareholder.
Job loses, early retirement, ETC. The trickle down effect will be enormous on the communities where A- Busch does business. For once, will
the people of this country think past their “ME FIRST” way of thinking.
John
at $67.05 todays quote on Bud they will gain $2.95
(Anhueser Busch will not be sold on my watch)
August Busch iv