Out with the Old Board, in with the New?

Hostile M&A strategy of replacing directors takes the spotlight as InBev wants to replace Anheuser's August Busch IV with "uncle" Adolphus IV; Micr...
Roy HarrisJuly 7, 2008

The hostile-acquisition strategy of getting a target’s shareholders to replace a resistant board came into sharp focus with announcements today in two of the biggest bids of the year: InBev’s offer for Anheuser-Busch, and Microsoft’s earlier-withdrawn bid for Yahoo.

In a filing with the Securities and Exchange Commission, Belgian brewer InBev NV asked St. Louis-based Anheuser-Busch Cos. to set a record date for the $46.3-billion InBev solicitation, which Anheuser rejected last month as insufficient. InBev proposed replacing Anheuser CEO August Busch IV, along with other directors, in favor of a board containing Busch’s uncle, Adolphus Busch IV. The uncle, a great-grandson of the company’s founder, is described as supportive of the bid in a Bloomberg News report on the filing. August Busch, of course, is leading the opposition.

Bloomberg also quoted Wim Hoste, a KBC Securities analyst based in Brussels, as saying that it is “getting less likely that InBev will increase its offer.” He called the InBev bid to replace the board as “a way of keeping up pressure,” so that either the current board talks to InBev, of “a renewed board could be more positive.” He also said, however, that the approach “slows down the pace of the takeover project.”

In addition to Adolphus Busch, directors proposed by InBev, which markets such brands as Stella Artois, Beck’s and Bass, include two prominent one-time CFOs: retired Trane Inc. finance chief G. Peter D’Aloia and former Nabisco Group Holders CFO James E. Healey. Also among the 13 nominees are ex-Pfizer Inc. Chairman Henry McKinnell; retired Guidant Corp. CEO Ronald W. Dollens; retired Dun & Bradstreet Inc. chairman Allan Z. Loren; retired Lockheed Martin Corp. chief counsel William T. Vinson; and retired ArvinMeritor Inc. CEO Larry D. Yost.

Terms of the proposal for a record date call for Anheuser to respond within 10 days, with a majority vote of Anheuser shareholders required before the solicitation.

InBev CEO Carlos Brito said of the latest filing, “Our strong preference remains to enter into a constructive dialogue with Anheuser-Busch to achieve a friendly combination that comprehensively addresses the interests of all constituents.” He added that the offer of $65 per share “is backed by fully committed financing and provides immediate certainty of value in a weakened stock market environment.”

In the case of Microsoft’s $47.5-billion bid for Yahoo, which was withdrawn in May after Yahoo called it insufficient, Microsoft said that it might renew talks for a Yahoo deal if Carl Icahn is successful in replacing the Yahoo board. The step by Microsoft, which is looking for a way to challenge the giant search-engine force of Google Inc. was seen as strong support for the bid by the billionaire investor to take control of Yahoo.

Icahn issued a statement saying that Yahoo “is now moving toward a precipice,” according to Bloomberg. “It is time for a change,” Icahn added.

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