August A. Busch IV is a born beer salesman. Beginning today, the chief executive of Anheuser-Busch Cos. will have to make the sales pitch of his life — convincing investors that his company is better off alone, without becoming a division of Belgian brewer InBev.

The standoff between two of the world's biggest brewers intensified Thursday as St. Louis-based Anheuser-Busch rejected a $47.5 billion buyout bid from rival InBev, setting the stage for a fight that could drag on for months.

Anheuser-Busch's board unanimously rejected InBev's $65-per-share cash bid made on June 11, calling the proposal "financially inadequate" and not in the best interests of Anheuser-Busch shareholders. Anheuser-Busch executives are scheduled to explain that decision and the company's strategy to increase earnings during a conference call with investors this morning.

The response came just hours after InBev indicated in a lawsuit filed in Delaware Chancery Court that it is prepared to seek the ouster of all 13 Anheuser-Busch directors and pave the way for a takeover.

"The big picture is, InBev is not going away," said Jack Russo, an analyst at Edward Jones in Des Peres.

On Thursday afternoon, Anheuser-Busch rebuffed InBev's proposal and said it had better plans of its own.

"InBev's proposal significantly undervalues the unique assets and prospects of Anheuser-Busch," Patrick Stokes, chairman of Anheuser-Busch, said in a statement. "The proposed price does not reflect the strength of Anheuser-Busch's global, iconic brands Bud Light and Budweiser."

Douglas A. Warner III, Anheuser-Busch's lead independent director, said the board would continue to consider "all opportunities that build shareholder value." But InBev's proposal "fails to be competitive" with Anheuser-Busch's alternative plans to increase its revenue, profits and shareholder value, said Warner, a retired chairman of J.P. Morgan Chase & Co.

Anheuser-Busch said on Thursday that it plans to deepen its cost-cutting initiative to slash $1 billion in costs through 2010; previously, it had planned more than $400 million in cuts over four years.

But the company gave few other details of its strategic plan, waiting to outline it during the conference call this morning. Analysts said the company needs to quickly do so to convince investors that it can generate a stock price close to $65 a share.

Anheuser-Busch's public statements on Thursday did not address the company's "fundamental lack of top-line growth prospects," Standard & Poor's equity analyst Esther Kwon wrote in a research note.

"Management's alternate plan could surprise investors and analysts, including us, and be deemed a near-$65-equivalent," Mark Swartzberg of Stifel, Nicolaus wrote Thursday morning after the Wall Street Journal reported elements of the plan. "Or more likely, it will simply reinforce the appeal of InBev's all-cash $65 offer."

The Journal reported that the plan could include sale of noncore assets, such as Busch Gardens and SeaWorld theme parks, and a special dividend to shareholders.

Although responding to InBev after two weeks of silence takes a bit of pressure off Anheuser-Busch, the St. Louis company is "going to have to get more specific on their plan to generate value for shareholders," said Russo.

In a letter dated Thursday, Busch told InBev CEO Carlos Brito that "a transaction with InBev at this time would mean forgoing the greater value obtainable from Anheuser-Busch's strategic growth plan. We are convinced that pursuing our program will enable Anheuser-Busch shareholders, rather than InBev shareholders, to realize the inherent value of Anheuser-Busch."

Busch criticized the proposed price, telling Brito that recent acquisitions of other big consumer product companies with iconic brands have commanded "much higher" valuations.

Busch told Brito that Anheuser-Busch respects "your desires to grow your company. But your growth should not come at the expense of our stockholders."

InBev was reviewing the Anheuser-Busch statement Thursday afternoon and declined to comment immediately, spokesman Steve Lipin said.

InBev has the ability to offer up to $70 per share for Anheuser-Busch, financed completely by debt, Banc of America Securities analyst Bryan Spillane wrote Thursday. The company could even go higher if it issued more stock, he said.

OUSTING BOARD

For two weeks, InBev steadily said that it wanted a friendly deal. On Thursday, the brewer took off the gloves.

The Belgian company's eight-page lawsuit seeks a court ruling in Delaware, where Anheuser-Busch is incorporated, to back up its belief that all of the St. Louis company's directors can be removed by shareholders without cause.

InBev's lawsuit says the lack of a response from Anheuser-Busch signals delay tactics and a "preconceived opposition" to a deal.

While still insisting it wants a friendly takeover, InBev says a court order would preserve shareholders' voice in the matter.

"In a takeover, this is part of the game," said Charles Elson, chairman of the John L. Weinberg Center for Corporate Governance at the University of Delaware's Lerner College of Business & Economics. "Litigation is part of the strategy. Its all meant to get the other side to the table and enhance your negotiating position."

An InBev spokesman wouldn't say how soon the company might seek to oust the Anheuser-Busch board, or whether it will wait for a court judgment before doing so.

Meanwhile, Anheuser-Busch's directors amended the company's bylaws on Thursday in a move that could give the brewer more time to mount a defense before shareholders vote to change the board.

S&P's Kwon said the lawsuit is a sign that the maker of Stella Artois and Beck's beers believes its bid is solid.

"We see this move indicating its willingness to go hostile and think that it could also show InBev's reluctance to raise its offer above $65 per share," Kwon said in a note to clients. "We still believe a sale to InBev is the best means to realize shareholder value and think a buyout at that price has a reasonable chance of being completed."

Some Anheuser-Busch shareholders have already said they consider the $65 enticing, and doubt the King of Beers can match the value being offered by InBev — at least over the next couple of years.

InBev's lawsuit suggests Brito had become impatient with the lack of response from Anheuser-Busch.

"It appears that, from the onset, delay tactics would be one means by which (Anheuser-Busch) would seek to frustrate" the proposal, the suit says.

Before InBev made its takeover proposal, August Busch IV told InBev executives that his company was "not for sale" and that he and the Anheuser-Busch board were "committed" to keeping the company independent, according to the lawsuit.

Anheuser-Busch's charter doesn't prevent stockholders from removing board members by written consent, the InBev lawsuit says. It is unclear, however, whether InBev could seek to replace all 13 Anheuser-Busch directors or just the eight elected after the company did away with staggered board terms in 2006.

Board-replacement lawsuits are not uncommon in takeover bids, said Beth Young, senior research associate at the Corporate Library research group. They are meant to push the target "into a negotiating posture," she said.

Anheuser-Busch's negative response will not soften InBev's resolve to take over America's biggest brewer, according to B. Craig Hutson, a senior bond analyst at Gimme Credit.

"InBev's not going to throw in the towel," he said. "This just strengthens their resolve to go directly to shareholders."

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