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InBev: Hostile Takeover On Tap


Belgian brewer plans to remove Board of Directors.

InBev's bid for Anheuser-Busch (BUD) is turning into a barroom brawl.

The Belgian brewer will attempt to remove Anheuser-Busch's board of directors to give shareholders a "direct voice" in the planned takeover. InBev plans to file the necessary paperwork with the Securities and Exchange Commission Monday.

Two weeks ago, InBev offered $65 a share for the Budweiser brewer; Anheuser-Busch rejected the bid, saying it undervalued the company - despite the fact that the offer is 18% above Anheuser's previous all-time share price high in October 2002.

Anheuser then presented its own plan to increase earnings and cut costs in an effort to boost share price in the future. InBev's offer drove the stock higher, and Anheuser-Busch recently traded at $61.67 a share.

InBev proposes to keep Adolphus Busch IV on the reconstituted board and add former Guidant Chief Executive Officer Ronald Dollens (Guidant merged with Boston Scientific (BSX)); former Nabisco (KFT) Chief Financial Officer James Healey; former Pillsbury (GIS) CEO John Lilly; former GlaxoSmithKline (GSK) CEO Ernest Mario; and former Lockheed Martin (LMT) Chief Counsel William Vinson.

InBev, the maker of Stella Artois, is active in Europe but focuses on the emerging economies of Latin America, Asia, Eastern Europe and Russia to increase sales. Combining the firm with Anheuser-Busch would create the world's largest brewer, as well as one of the world's five largest consumer-goods companies. This has raised concerns among some politicians that the takeover would be tantamount to monopoly.

Overall, beer is a ho-hum, slow-growth industry.

Craft beer such as Boston Beer Company's (SAM) Sam Adams has found a secure niche since it went public in 1996, but investors ask: Where's the growth? The stock recently fetched $40.59 a share. The 52-week range is $31 to $55.30.

Colorado's Coors and Canadian brewer Molson merged in 2004 to form Molson Coors Brewing (TAP), swallowing rival Miller in 2007. Still, Anheuser-Bush grabs about half of the U.S. beer market.

Wine sales continue to grow. In 2007, wine sales increased 6.2% in dollar value and 3% in total sales, the wine industry reported. The price increase underscores steady demand.

Well-known labels such as Beringer, Ravenswood and R.H. Phillips rode the IPO mania of the 1990s to successful deals and have since been snapped up by larger companies. In 2004, Constellation Brands (STZ) bought Robert Mondavi for about $1.4 billion.

Constellation Brands, the world's largest wine company by volume, reported a solid first-quarter jump in profits based on price increases and sales of higher-margin brands such as Clos de Bois and Wild Horse.

Constellation Brands earned $44.6 million, or 20 cents per common share, in the quarter ended May 31 compared with $29.8 million, or 13 cents per share, for the same period a year ago. Sales rose 3% to $932 million from $901 million.

InBev has pledged not to shut any U.S. breweries and to keep Anheuser-Busch's headquarters in St. Louis. But this hasn't stopped some politicians from opposing the deal, yowling that it would damage the economy in Missouri. They have yet to understand the benefits of foreign investment.
No positions in stocks mentioned.
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