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August Busch IV's rejection letter to Carlos Brito

In a letter between the two CEOs, Anheuser-Busch has rejected InBev's unsolicited proposal, which could lead to a hostile takeover (click here to read the full story). Read on to see exactly what August Busch IV had to say to Inbev's CEO, Carlos Brito.

June 26, 2008

Mr. Carlos Brito
Chief Executive Officer
InBev nv/sa
Brouwerijplein 1
3000 Leuven

Dear Carlos,

This is to provide you with a response from the Anheuser-Busch board of directors to your unsolicited and non-binding proposal submitted June 11th.

First, let me express our appreciation for your public comments about your high regard for Anheuser-Busch, its employees, leadership and wholesalers, remarking on the success of our company in building iconic brands and the independence of its board of directors.

We have noted that your letter is expressly not an offer, but only a non-binding proposal. Notwithstanding the non-binding nature of your proposal, the Anheuser-Busch board carefully and thoroughly examined all aspects of your proposal with the assistance of independent advisers.

The board unanimously concluded your proposal is inadequate and not in the best interests of Anheuser-Busch shareholders.  In reaching this conclusion, the board considered the advice of its independent financial advisers.

 The Anheuser-Busch board believes that your proposed price substantially undervalues Anheuser-Busch, its key assets and its prospects, among them:
▪     Premier, iconic brands – Anheuser-Busch has built coveted, highly valued brands over the past 150 years. Budweiser and Bud Light are among the top 10 global consumer brands and are supported by valuable marketing properties. Bud Light is the largest selling beer brand in the world and Budweiser is the second-largest. These brands have strong consumer loyalty. Recent change of control acquisitions of other major consumer product companies with iconic brands have been valued at much higher multiples than what you have proposed for Anheuser-Busch shareholders.
▪      Market leader position – The strength of these brands and the close relationship the company has with its wholesalers have made Anheuser-Busch the US market leader with almost 50% share in the world's most-profitable beer market.  In sheer size, the United States is the world's second-largest beer market and continues to grow.
▪     Growing international partners – Anheuser-Busch has large, strategic investments in two international brewers in important growth markets. We hold a 50% direct and indirect interest in Grupo Modelo, the leading brewer in Mexico, another very profitable beer market. Modelo also has a strong, growing business in the United States. We hold a 27% interest in Tsingtao, the leading premium beer and one of the largest brewers in China, which is the largest and fastest-growing beer market in the world.
▪     Global brand business – Budweiser is a leading global brand, sold in 80 countries around the world, and is the largest-selling beer in Canada. Budweiser is the leading international brand in China, the world's largest and fastest-growing beer market. We own our Budweiser brewery in India and recently entered Vietnam. We see strong growth for Budweiser in Mexico, Argentina, Paraguay and other Latin American markets.
▪     Accelerated Earnings Growth – Our company already has developed a detailed, accelerated earnings growth plan that 1.) expands our cost initiative through an enhanced productivity plan that we refer to as the Blue Ocean effort to  deliver more than $750 million in savings through 2009 and $1 billion in savings through 2010, while furthering environmental  sustainability; 2.) extends the strong revenue growth from our brands that we've seen over the past five years; and  3.) drives additional volume growth for core brands through new consumer opportunities and for our successful, higher-margin  new products.

 Anheuser-Busch's beer brand building expertise is an asset without comparison. Our brands sell in countries around the world and are sought by consumers everywhere. Our award winning advertising, US and global sponsorships and superior-quality image are second to none.

As you state in your letter, there is limited overlap in our respective businesses. Many of the suggested synergies seem not to be synergies at all, but are instead profit enhancements. We believe that we can deliver similar enhancements to our shareholders independent of a transaction, and have included these enhancements in our accelerated earnings growth plan.

From your standpoint, we see that now could be opportunistic timing for you to make this acquisition, given the weak US dollar and sluggish US stock market. From the standpoint of the Anheuser-Busch shareholder, however, a transaction with InBev at this time would mean foregoing 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 realise the inherent value of Anheuser-Busch.

While Anheuser-Busch pursues its plan, its board will continue to consider any strategic alternative that would be in the best interests of Anheuser-Busch shareholders. The board is open to consider any proposal that would provide full and certain value to Anheuser Busch shareholders.

Our two companies know each other well and have a close dialogue and relationship. This has developed over the years through our joint agreements in the United States, Canada and South Korea and through our exploration of other joint business deals. As you say yourself, you dream big. We respect your desires to grow your company. But your growth should not come at the expense of our stockholders.

Very truly yours,

August A. Busch IV

cc: Board of Directors of InBev nv/sa

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