Anheuser Rejects Takeover Bid; InBev Files Suit

InBev said on Thursday it filed a lawsuit to confirm that Anheuser-Busch shareholders can remove the U.S. brewer's entire 13-member board without cause, as it seeks avenues of support for its $46.3 billion takeover bid.

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Meanwhile, Anheuser-Busch's board formally rejected InBev's $65-per-share offer to acquire the company, saying it's financially inadequate. (See more below.)

While InBev's move was seen by experts as the beginning of what could become a hostile takeover bid for Anheuser-Busch, InBev said its "strong preference" is to enter into a constructive dialogue with the U.S. brewer's board to achieve "a friendly combination."

"What we see now is how quickly what was a relatively friendly offer has devolved," said Anthony Sabino, a law professor at St. John's University's Tobin College of Business in New York. "The legal maneuver is right out of the playbook in mergers and acquisitions. They want to have a shareholder vote and get their people on the board."

Anheuser-Busch shares closed down 41 cents at $61.35 on the New York Stock Exchange, but rose to near $62 in after-hours trade.

An Anheuser-Busch spokeswoman was not immediately available for comment.

Anheuser-Busch got approval in 2006 to destagger its board elections but is still phasing in the changes, meaning some board members must be reelected annually while others can serve longer terms.

In the lawsuit filed in Delaware Chancery Court, InBev said that under Anheuser's corporate charter and state law, it is clear that eight directors elected after 2006 are subject to removal without cause through written shareholder consent.

The suit seeks to confirm that the remaining directors, who were elected before Anheuser changed its board rules, are also now subject to removal through the same mechanism, InBev said.

"The tricky part is ... director removal provisions," said Shirley Westcott, managing director of policy for proxy advisory firm Proxy Governance.

Westcott said it would be up to the Delaware court to decide such an issue.

Anheuser Board: No Deal, But Still Considering Alternatives

Anheuser-Busch said late Thursday that its board of directors unanimously rejected InBev's bid but said it would continue to consider strategic alternatives.

"We will carefully study the letter and will respond in due course," an InBev spokeswoman said Friday.

Anheuser-Busch said InBev's bid undervalued the company, which controls nearly half the U.S. beer market, owns half of Grupo Modelo in Mexico and 27 percent of Tsingtao Brewery in China.

The $65-per-share bid represents a 24 percent premium to Anheuser's closing share price a day before reports of merger talks surfaced.

"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," he added.

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