Coddled fine tuned US capitalism is in for a major shake up forced by the capital that went abroad, mutated and came out to reform US and European capitalism
Another example of capitalism reform. (See below the
Siemens lay off overdue.
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<<InBev's Growth
InBev, which traces its roots to 1366, took its current form in 2004 when Leuven-based Interbrew SA bought Sao Paulo- based Cia. de Bebidas das Americas, or AmBev, in an $11 billion transaction.
In less than two years, Interbrew's American CEO was replaced by Brito, a Brazilian groomed by Jorge Paulo Lemann and two other Brazilian bankers who had built AmBev from a brewer they acquired in 1989. Since the merger>>
Now is time to put some savagae capitalims to work.
Anheuser to Slash 1,000 Jobs, Raise Prices
By DAVID KESMODEL and MATTHEW KARNITSCHNIG
June 28, 2008; Page B6
Anheuser-Busch Cos., trumpeting a new business plan after rebuffing an unsolicited takeover bid by rival InBev NV, said Friday it planned to slash about 1,000 jobs, raise beer prices and buy back more of its shares.
The St. Louis brewer's strategy, laid out in a conference call with investors, included $500 million in new cost savings, and higher earnings targets. But the plan is unlikely to deter InBev, which has hinted it might turn hostile and take its $46.35 billion bid for the dominant U.S. brewer directly to Anheuser's shareholders.
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Budweiser brewer Anheuser, as it contends with an unsolicited takeover bid from InBev, is cutting costs to shore up its profit.
Anheuser executives said they intend to cut $1 billion in costs by 2010. They said that the cost-cutting plan exceeds a previous program to trim costs by about $500 million over four years, and that the new effort was in the works before InBev made its bid on June 11.
The U.S. brewer reiterated its view that InBev's $65-a-share cash offer "substantially" undervalued the brewer, but indicated it would be open to considering higher offers. People close to the company said it would entertain an offer in the $70-a-share range.
Anheuser estimates that the measures it is undertaking to improve earnings would result in a share price of $62, or a few dollars below InBev's $65 offer. Anheuser stock, which has been boosted by InBev's offer, closed on Friday at $62.26, up 91 cents, in 4 p.m. New York Stock Exchange composite trading.
"There's nothing they are offering that we can't do ourselves," said one person close to Anheuser. "They're trying to push people into a corner."
While investors generally welcomed Anheuser's plan, some questioned whether it would substantially boost the company's shares, given the recent sharp declines in the overall market.
The two sides have fundamentally different views of how Anheuser should be valued.
InBev prefers a calculation that doesn't include Anheuser's 50% stake in Mexican brewer Grupo Modelo SA or its 27% stake in Chinese brewer Tsingtao. By that method, InBev's offer values Anheuser at 12 times 2007 earnings before interest, taxes, depreciation and amortization. InBev argues that its bid for Anheuser values the brewer above other recent beer industry transactions that, by its calculation, have been in the 11-12 times Ebitda range.
Anheuser prefers to reflect the value of both Modelo and Tsingtao, however. Including those holdings, it says InBev's offer is only worth 11.5 times Anheuser's 2007 Ebitda. What's more, it puts the value of other recent beer deals, including the purchase of Scottish & Newcastle PLC by Heineken NV and Carlsberg A/S in the 13-14 times Ebitda range.
As part of its new cost-cutting plan, Anheuser said it would offer an early-retirement program in this year's third quarter that, combined with attrition, would pare its salaried work force of about 8,600 people by 10% to 15%.
The brewer said beer sales this summer have exceeded expectations. It said the cost cuts and planned price increases would help raise its revenue per barrel and its earnings. Its earnings forecast is $3.13 a share for 2008 and $3.90 a share for 2009. Both estimates are above analysts' projections.
"I have absolute confidence in the team," Anheuser Chief Executive August Busch IV said in an interview. "We have been working seriously on this for a long time."
He said Anheuser's plan to drive shareholder value was superior to InBev's because "we know where the costs are."
The brewer said it had decided against selling its theme-park and packaging businesses after a rigorous review.
"I didn't expect much meat on the bones, but they gave a very compelling presentation," said Dan Poole, an analyst with National City Corp.'s private-client group in Cleveland, which manages $33 billion, including Anheuser shares.
But Mr. Poole said that he expected InBev to increase its offer, and that it could be hard for shareholders to turn it down if InBev went hostile and took the offer directly to them. "If they're going to get it done, I think it has to go higher" than $65, he said.
Carrie Schloss, an analyst with Talon Asset Management in Chicago, which owns Anheuser stock, said the beer maker took some "great steps," but that the plan carries risks, because increasing beer prices could hurt sales volume.
Mr. Busch declined to comment on the status of any discussions between Anheuser and its Mexican partner, Grupo Modelo. The Wall Street Journal reported earlier this month that Anheuser had approached Modelo about acquiring the half of its partner it doesn't own, a move that could make Anheuser too expensive for InBev to acquire.
InBev began taking legal steps Thursday to replace Anheuser's board, seeking a court ruling in Delaware clarifying that Anheuser shareholders could oust all 13 directors by written consent without cause. Mr. Busch said Friday that his company would fight the move.
InBev, the maker of Stella Artois and Beck's, is the world's second-largest brewer by volume after London's SABMiller PLC. Anheuser ranks No. 3 and controls nearly half of the U.S. market, the world's most profitable.
Write to David Kesmodel at david.kesmodel@wsj.com and Matthew Karnitschnig at matthew.karnitschnig@wsj.com |
