Anheuser-Busch Cos. made it clear over the past few weeks that it was not impressed with a $47.5 billion takeover proposal from InBev of Belgium. The St. Louis-based brewer of Budweiser derided the $65-a-share proposal as not even competitive with Anheuser-Busch's true potential. Lawsuits flew from both sides. Acrimony simmered.

Anheuser-Busch appears to be doing an about-face. The company is reported to have opened talks to sell itself to InBev in a friendly deal, enticed by a sweetened deal of $70 a share.

A flurry of media stories Friday reported that InBev boosted its takeover offer by $5 a share to $70 in an effort to seal a friendly acquisition of Anheuser-Busch.

"We view this as a huge step toward a deal," Wachovia analyst Jonathan Feeney wrote Friday in a research note.

Both InBev and Anheuser-Busch on Friday declined to comment on the reports.

According to the Financial Times, Anheuser-Busch chief executive August A. Busch IV was in New York on Friday to meet with Carlos Brito, InBev's CEO, to hammer out the approximately $50 billion deal.

As late as Wednesday afternoon, Brito told the Post-Dispatch that Anheuser-Busch's board had not yet engaged with InBev.

InBev had pushed for face-to-face negotiations and a friendly deal all along while threatening hostile maneuvers like a proposal asking shareholders to replace Anheuser-Busch's board.

The two-pronged strategy left analysts wondering what was more important to InBev — keeping the deal friendly, even if it required a higher price? Or sticking to its price of $65 a share, even if it led to a nasty, hostile bid that could alienate Anheuser-Busch's employees, wholesalers and drinkers?

"It seemed to me that InBev was more willing to go hostile rather than raise the bid," said Morningstar analyst Ann Gilpin. But maybe that was only a negotiating ploy, she said Friday.

"If InBev wanted to get it done at $65 (a share), they could do it" by soliciting shareholders directly and circumventing A-B's board, said Gilpin. "But they would pay the consequences for that, because there would be all kinds of problems."

Challenges still remain, even if the companies are hashing things out. There is the need to piece together an additional $4 billion or so in financing and reaching agreements on Anheuser-Busch's final price, said Feeney. The talks could still break down, he added.

InBev is trying to take care of the first concern, starting to round up $45 billion in promised bank loans to back its acquisition of Anheuser-Busch, according to Reuters.

Helping to drive the talks was the indication that some of Anheuser-Busch's largest shareholders, including Warren Buffett, were leaning toward backing a deal with InBev, the New York Times said.

"The situation will probably be resolved soon," said Sachin Shah, a special situations analyst with ICAP Securities in New York. "It's better to negotiate."

Industry observers wonder whether Anheuser-Busch's holding out was a strategy to get a higher price rather than an all-out defense against a takeover. Perhaps its litigation, competing valuations and a newly minted strategic plan to hit at least $65 a share in 2009 were actually just public negotiating chips to bounce InBev to a higher offer, analysts said. Was it all part of the great chess game?

Less than two weeks ago, Anheuser-Busch reached the final stages of a deal to buy the half of Mexican brewer Grupo Modelo that it does not already own, according to the Financial Times. The move that could have made Anheuser-Busch prohibitively expensive for InBev.

But with the potential Modelo deal in hand, Anheuser-Busch returned to InBev to see whether the Belgian brewer of Stella Artois would boost its bid, according to the London-based paper.

"The hostility (between Anheuser-Busch and InBev) was perhaps never as entrenched as it might have appeared from the rhetoric," said Andrew Holland, an analyst with Dresdner Kleinwort in London.

"This hostility stuff is always costly for everybody," said B. Espen Eckbo, professor of finance at Dartmouth College. "After all, these two companies are going to have to work with each other."

Feeney, of Wachovia, said Anheuser-Busch's rejection of $65 a share as too low an offer included some posturing but also some solid reasoning. By Wachovia's calculations, even $70 a share would be a "substantial discount" to other deals for global consumer goods companies that Anheuser-Busch compares itself with, he said.

On June 26, Anheuser-Busch announced that its board had rejected InBev's $47.5 billion takeover bid, saying the $65-a-share offer had undervalued the company. It also announced that the brewer would make strategic moves, including job cuts, to increase the value of the company.

Since then, InBev and A-B have traded regulatory and court filings, with saber-rattling drowning out Brito's assurances that both company's were taking the "high ground."

InBev on Monday proposed replacing the entire Anheuser-Busch board. The company had previously asked a Delaware court for an opinion on whether the board could be removed in total — a move designed to turn up the heat under Anheuser-Busch's incumbent board. In a regulatory filing, InBev presented its own list of board members — including an outspoken uncle of August A. Busch IV — and said it would seek shareholders support.

Anheuser-Busch shot back that same day, filing a lawsuit accusing InBev of using false and misleading information to convince shareholders that its takeover bid was in their best interests. And on Wednesday, A-B made its own regulatory filing saying it would ask shareholders to reject InBev's attempt to replace its board.

"I thought A-B kind of had their heels dug in. … It looked like there was going to be a long, protracted battle," said Edward Jones analyst Jack Russo. "I'm a little surprised that so quickly things seem to have come together."

jmcwilliams@post-dispatch.com

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