Anheuser-Busch Cos Inc (BUD.N)
plans to reject InBev NV's (
takeover offer, saying it undervalues the company, a source
familiar with the situation said on Wednesday.
Anheuser-Busch, the brewer of Budweiser beer, and InBev,
the maker of Stella Artois and Beck's, could not be immediately
reached for comment.
In rebuffing InBev's offer, Anheuser-Busch plans to map out
its own restructuring plan soon that would include the sale of
the company's theme park operations,
The plan also would include layoffs, more than $500 million
in cost-cutting efforts and the sale of Anheuser-Busch's
packaging unit, the New York Times added.
"It sounds dead-on. It's what we were expecting. The
interesting thing is what happens next." said Tom Pirko,
president of Bevmark, a Santa Barbara, California-based
beverage industry consulting firm.
The timing of Anheuser-Busch's restructuring announcement
was not clear, but the source said the company's board viewed
InBev's $65-per-share offer as too low. The source declined to
be identified by name because the source was not authorized to
speak to the media.
Pirko said a rejection from Anheuser sets the stage for
InBev to either raise its bid or take its bid directly to
shareholders -- options he said InBev is likely to pursue.
Analysts had speculated InBev may have to raise its offer
by more than $3 billion, to around $70 a share, to woo its
shareholders into a deal to create the world's largest brewer,
making a quarter of the world's beer.
InBev is prepared to take its bid directly to
Anheuser-Busch shareholders through a tender offer, the Wall
Street Journal said. InBev has yet to decide whether to pursue
such a course, however.
"It would be surprising to think that Brito, with a bone
already in his mouth, would take it out," said Pirko, referring
to InBev Chief Executive Carlos Brito.
Anheuser-Busch has few takeover defenses to thwart a
hostile offer, making it feasible for an unwanted suitor to
acquire the company.
InBev on Wednesday prodded Anheuser-Busch by saying it
remained available to discuss the bid, but stressed that time
was "of the essence."
InBev said it had commitment letters for the financing for
the deal and has paid $50 million in commitment fees to a
10-bank lending group.
It has been two weeks since the Belgian-Brazilian brewer
launched its bid for Anheuser-Busch, but the maker of Budweiser
and Michelob has yet to respond.
Analysts have said that if Anheuser puts off negotiations
for too long, InBev may just take its offer directly to
shareholders in a hostile bid.
That could be bad for Anheuser, analysts have said, since
InBev's bid would give shareholders a significant premium that
Anheuser would have trouble matching on its own.
The $65-a-share offer, which tops Anheuser's all-time high,
is 24 percent higher than the stock's closing price the day
before reports of merger talks surfaced, and 35 percent higher
than the average share price over the preceding month.
Shares of Anheuser-Busch closed on Wednesday at $61.76, up
63 cents, or 1 percent, on the New York Stock Exchange.
BAD TIMING FOR THEME PARK SALE
Any reorganization is expected to include "scores" of
layoffs, which could anger unions and local politicians in St.
Louis, who had pressured Anheuser-Busch to reject the bid in an
effort to save jobs, the New York Times reported.
If Anheuser-Busch tries to sell its 10 amusement, marine
and water parks -- including SeaWorld and Busch Gardens -- that
drew more than 22 million customers last year, it may find it
difficult to find a buyer in the weak U.S. economy, analysts
Busch Entertainment Corp, Anheuser's theme park unit, last
year accounted for almost 8 percent of the company's sales and
net income at $1.27 billion and $162.9 million, respectively.
Lehman Brothers valued Anheuser's theme park business at
$2.9 billion. Historically, such assets have attracted bids
topping 10 times cash flow, but the sputtering economy could
weigh on any sale price and multiples may hover in the high
single digits, analysts said.
Analysts and investors had expected the Anheuser-Busch to
respond slowly as it explores a restructuring, or other
options, which may include trying to buy out Mexican brewer
Grupo Modelo (
Corona-brewer Modelo, but has no management control
Billionaire investor Warren Buffett, whose Berkshire
Hathaway is Anheuser's second-largest shareholder, told CNBC on
Wednesday that he viewed the beer battle as "an interesting
spectator sport" but had not thrown his support behind either
Barclays Global Investors, the funds arm of British bank
Barclays Plc (BARC.L), is the largest shareholder in Anheuser.
(Additional reporting by Martinne Geller in New York,
editing by Richard Chang and Carol Bishopric)
(For more M&A news and our DealZone blog, go to
General Electric Co's (GE.N) auction
of its $30 billion credit-card business is attracting only
tepid interest, according to an article on the Wall Street
Prospective buyers are afraid that customers of stores like
Wal-Mart Stores Inc (WMT.N), J.C. Penney Co (JCP.N) and Lowe's
(LOW.N) are having trouble paying their bills, said the report.
JPMorgan Chase & Co (JPM.N), which was seen as a likely
acquirer of the business, recently dropped out of the bidding,
the article said, citing people familiar with the situation.
Other companies with large credit-card portfolios, such as
Citigroup Inc (C.N), Bank of America Corp (BAC.N) and Capital
One Financial Corp (COF.N), also aren't expected to submit
bids, as a result of rising delinquencies and charge-offs in
their own card portfolios, said the report.
In addition to
issues cards for a other retailers, including Brooks Brothers,
home-furnishing chain Ikea and the Dillard's department-store
GE is one of the largest issuers of so-called private-label
credit cards, which can be used only in specific stores.
Retailers may help to pitch these cards to customers, but
GE -- or any other private-label issuer -- bears the financial
responsibility of owning the loans, the article noted.
Jeffrey Immelt, GE's chairman and chief executive, has
personally reached out to prospective buyers, said the report,
citing a person familiar with the situation.
(Reporting by Euan Rocha; Editing by Kim Coghill)
Oracle Corp (ORCL.O) reported a 27
percent rise in quarterly profit as sales of new software beat
expectations, but the company gave a cautious outlook citing
economic uncertainties, and its shares fell 3 percent.
Oracle, whose shares had been near a seven-year high,
posted May quarter results that topped Wall Street estimates on
virtually all measures. But the company cautioned that while
business is growing, deals are taking longer to close than they
have historically as customers are giving them more scrutiny.
"Bit more cautious environment. But ... we have a big
enough pipeline hopefully to get through it all," Oracle
President Charles Phillips said on a conference call.
Oracle gave forecasts for its fiscal first quarter, ending
in August, roughly in line with expectations. It saw revenue
growing 18 percent to 20 percent, net income at 17 to 18 cents
per share, and earnings excluding items at 26 to 27 cents.
Analysts, on average, were looking for earnings excluding
items of 27 cents per share, according to Reuters Estimates.
Pacific Crest Securities analyst Brendan Barnicle said
Oracle's commentary on business trends suggested some caution
about the economy. He said smaller software maker Red Hat Inc
(RHT.N) exhibited a similar tone in its report on Wednesday.
"I think companies are going to continue to be cautious
about their guidance that they give moving into summer,"
Chief Financial Officer Safra Catz said the August quarter
faced tough comparisons with a year ago, when software license
growth had jumped 35 percent from the year-earlier period.
"We can't predict the economy from one quarter to the
next," Catz said.
Goldman Sachs analyst Sarah Friar said Oracle's report was
strong but some investors were cashing in profits after the
stock hit a seven-year high of $23.57 on June 3. The shares
fell to $21.80 in after-hours trade.
A TIME TO INVEST
Friar, noting the selling by short-term investors, saw few
catalysts for buying the stock over the next few months, but
she believes it could rise 20 percent over the next year.
"There are times to be a trader and there are times to
invest," she said. "Oracle is a stock I want to invest in."
Friar and other analysts said there was plenty to be happy
about in Oracle's results for the fiscal fourth quarter, which
ended on May 31 and tends to be its strongest every year.
Net income rose to $2.04 billion, or 39 cents per share,
from $1.60 billion, or 31 cents, a year earlier. Profit
excluding items was 47 cents a share, beating the average
analyst target of 44 cents.
Oracle, led by billionaire Larry Ellison, said sales of new
software licenses climbed 27 percent to $3.14 billion.
New software licenses are a key indicator for software
makers because customers also sign maintenance contracts that
typically cost 20 percent of the product price per year.
Customers may also expand the number of workers using a program
that they have already purchased.
Adjusted revenue rose 24 percent to $7.28 billion, topping
Wall Street's forecast of $6.93 billion.
Growth accelerated in the United States, with new software
sales up 22 percent versus 15 percent in the prior quarter -- a
performance analysts said was solid given the weak economy.
"These are strong results and evidence that Oracle's
hard-charging sales culture and ever more diversified product
line-up is paying off," Edward Jones analyst Andy Meidler said.
"We think that software in particular is an area that should
see strength, given its productivity enhancing ability."
In its earnings release Oracle did not disclose the impact
its April purchase of BEA Systems had on results. Some analysts
said they wish it had broken that out to make clear how much of
the earnings surprise was due to the acquisition.
New license sales of Oracle's business management software,
which competes with SAP AG (
third quarter, jumping 36 percent versus a year earlier.
David Garrity, director of research at Dinosaur Research,
said no one expected the results to be as strong as they were.
"Larry is just going to have to buy a bigger boat," he added.
(Additional reporting by Eric Auchard and Duncan Martell in
San Francisco; Editing by Jeffrey Benkoe and Braden Reddall)